This Week on the Frontiers, September 16th 2017

Myanmar continues to grab headlines for all the wrong reasons as its military persists with a campaign to attack and displace thousands of ethnic Muslim Rohingya. This week, the UN human-rights chief, Zeid Ra’ad al-Hussein, characterized the campaign as “a textbook example of ethnic cleansing,” that was prompting hundreds of thousands of Rohingya to flee to Bangladesh.

Myanmar’s de facto leader Aung San Suu Kyi has come under increasing criticism for failing to stop the attacks and this week canceled a trip to the UN, apparently to deal with “domestic security issues.”

Pakistan’s stock market perked up this week, with the benchmark KSE 100 index notching up a 3.25% gain. Trading volumes late in the week were turbocharged by index provider FTSE’s inclusion of five Pakistani stocks in its Asia Pacific ex-Japan index. Echoing the performance of the market as a whole in the wake of Pakistan’s upgrade by MSCI to emerging market status, though, all five stocks traded down on the news. According to Karachi-based brokerage Elixir Securities, active investors had built positions in the five companies in anticipation of the news and sold their stakes as passive funds bought into the stocks on Friday.

Sri Lanka’s economy appears to be ticking up, with annual GDP growth for the second quarter edging up to 4% from the previous quarter’s 3.8%. The chances of growth accelerating beyond that, though, are slim, according to Gareth Leather, senior Asia analyst at London-based Capital Economics. “With tight fiscal and monetary policy set to continue weighing on growth over the coming quarters, we see little prospect of a sustained economic recovery,” he said in a note this week. Leather believes monetary authorities will keep interest rates high in the face of persistently high inflation, which will continue to crimp growth.

Miners operating in Tanzania are bracing for further showdowns with the government, Nicholas Bariyo reports. According to Jared Jeffery, an analyst with NKC African Economics, officials are likely to extend the strict enforcement of tax laws in search of a greater share of mine revenue. Months after Africa’s number-four gold producer banned exports from Acacia Mining over a tax spat, London-listed Petra Diamonds halted operations at its Tanzanian mine Monday after authorities confiscated a parcel of diamonds worth $29.5 million. Jeffery says moves by investors to cut jobs and scale down operations have seemingly not rattled President John Magufuli. “Gold and diamond miners have gotten the Magufuli treatment and tanzanite miners appear to be next,” Jeffery said. “Investors in the country’s burgeoning gas sector will watch closely.”

Saudi Arabia sought to reassure citizens and potential investors of its commitment to revamp the country’s oil-dependent economy after a series of setbacks that slowed the effort, Margherita Stancati and Nicolas Parasie report. The government has backtracked on some politically-sensitive moves in recent months, postponing an increase in fuel prices and reinstating some government employee perks. It is now redrafting part of the plan to allow more time for implementation. ”It is important to adjust and adapt to unexpected situations,” Saudi Arabia’s Ministry of Culture and Information said on Saturday.

Bahrain launched a triple-tranche US dollar bond issue on Wednesday, including a 7.5-year sukuk, as well as 12- and 30-year conventional bonds, Emese Bartha writes. Sukuk bonds trade, clear, settle and are rated similarly to non-Shariah compliant bonds, but are structured to abide by Islamic law’s prohibition of conventional interest payments. The overall deal size was expected to be around $3 billion, with the sukuk capped at $850 million, one of the banks working on the deal said. The bonds received an enthusiastic reception from the market, with demand reaching $15 billion, according to the Financial Times.

Bahrain is one of the countries likely to suffer most from a continuing diplomatic stand-off between Qatar and several of its Gulf Cooperation Council neighbors, Nicolas Parasie reports. Ratings firm Moody’s said this week that the spat has created uncertainty across the Persian Gulf that could weaken the credit outlook of the countries there. “The severity of the diplomatic dispute between Gulf countries is unprecedented, which magnifies the uncertainty over the ultimate economic, fiscal and social impact on the GCC as a whole,” said Steffen Dyck, a vice president at Moody’s.

The recent decline in the issuance of dollar-denominated debt in the GCC region has apparently not been caused by the Qatar stand-off. Increased supply of local currency-denominated bonds is a more likely reason, Tasos Vossos writes. Gulf governments are keep to develop local corporate bond markets to end companies’ near-complete dependence on bank loans, according to Anita Yadav, head of fixed income research at Emirates NBD. Local currency supply has more than doubled so far in 2017 compared to the whole of 2016, reducing the need for external funding in the US dollar market.

A push for overhauls encouraged by Ukraine’s Western backers is deepening divisions in the government, including a call by some officials for the dismissal or investigation of the reformist finance minister, James Marson reports. The clash has raised concern in the US and EU and presents a new challenge for the country’s economy.

Finance Minister Oleksandr Danylyuk has driven efforts to overhaul state finances and cut official interference in business, steps seen as key in curbing corruption, prompting attacks from opponents who accuse him of hindering their work. Danylyuk appears unperturbed and on Monday began meeting with international investors with the aim of placing Ukraine’s first Eurobond since restructuring around $15 billion of foreign debt in 2015.

Venezuela’s government, looking for ways to circumvent US sanctions, is telling oil traders that it will no longer receive or send payments in dollars, Anatoly Kurmanaev writes. The state oil company PdVSA has told its private joint-venture partners to open accounts in euros and to convert existing cash holdings into Europe’s main currency, according to one project partner. The measure is designed to bypass financial sanctions President Donald Trump’s administration leveled against Venezuela’s government last month for jailing political opponents and creating a super body of pro-government delegates that bypasses all institutions.

On Friday, Venezuela’s Oil Ministry begins quoting crude prices in yuan, the currency of China, a strategic ally and lender to Venezuela, Kejal Vyas reports.

Argentina’s stubbornly high inflation rate, which clocked in at 1.4% on the month in August, is raising pressure on the country’s central bank, Taos Turner reports. Barring some surprise, the bank’s stated goal of capping inflation at 17% this year seems nearly impossible to reach. Inflation will have to be under 1% each month for the rest of 2017 if the annual rate is to end the year at 20%. President Mauricio Macri always promised to “gradually” overhaul the economy but it looks like the central bank may achieve its goal even more gradually than expected.

Key Stories from the WSJ

In Nigeria’s Wild Telecom Frontier, Firms Brave Shifting Rules for Hopes of Growth

Myanmar Militant Group Declares Cease-Fire

Video: Myanmar Faces Global Pressure Over Rohingya Crisis 

Bangladeshi Leader Calls on Myanmar to Take Rohingya Refugees Back

Saudi Arabia Cites Plot to Overthrow Kingdom as It Arrests More People

Around the Web

Kenya Businesses Prepare for Slowdown Amid Fresh Elections

Chinese Firm Inks $1b Deal for Rwanda Electronics Factory

Ghana Saves $1b on Gas Deal

Nigeria Agrees $5.8b Deal for 3,000MW Hydropower Project

EIB Provides $15m for Egypt Mid-Cap Fund

Branchless Banking in Pakistan Surges

Bangladesh Poised to Overtake China As Top Apparel Supplier to EU

Sri Lanka to Export Cannabis From First Plantation

EU President: Bulgaria and Romania Should Join Borderless Schengen Area‘Immediately’

US Urges Romania to Sustain Anti-Corruption Campaign 

Argentina Makes Progress on Economic Reforms