Americas: Argentina delays local-law debt repayments amid heightened
Key Risks: sovereign default; policy continuity
In Argentina, the government issued a decree unilaterally postponing the payment of up to US$10bln in dollar-denominated debt issued under local law until 31 December or a prior date to be determined by the Economy Ministry. The move, which is tantamount to a technical default, does not affect the almost US$70bln issued under international law that the government is in talks to restructure. Delaying payments on local-law debt could be the strategy to increase the chances of avoiding a default on foreign-law debt. Creditors are waiting for a restructuring offer on such debt which has been delayed due to the impact of the COVID-19 pandemic, which has led to a nationwide mandatory lockdown and associated measures to mitigate its economic and financial impact. Despite apparent efforts to try to avoid it, the risk of sovereign default remains high.
Asia-Pacific: Japan to declare state of emergency; announces US$989bln stimulus package
Key Risks: business; economic
Japan’s Prime Minister Shinzo Abe said he would propose to declare a state of emergency in the prefectures of Tokyo, Osaka, Fukuoka, Kanagawa, Saitama, Chiba and Hyogo for about a month. The announcement came amid increasing concerns over a renewed surge in confirmed COVID-19 cases in some of the country’s largest metropolitan areas, particularly Tokyo, which recorded 83 new cases on 6 April. To date there have been over 3,500 confirmed COVID-19 cases and 85 deaths in the country. Abe also announced that the government would release a larger than expected US$989bln stimulus package – worth around 20 per cent of GDP – including cash handouts to households, tax relief and support for businesses and employees. Cabinet will confirm the stimulus package on 7 April with the state of emergency expected to be implemented the same day.
Eurasia: Taliban accuses US of failing to adhere to peace agreement; rare demonstration in Turkmenistan
Key Risks: war on land; political stability; civil unrest; economic
Afghanistan’s conflict risks re-escalating after the Taliban on 4 April accused the US of failing to adhere to the 29 February peace agreement and as talks between the group and the government in Kabul over a prisoner exchange failed to progress. However, the same day the National Directorate for Security announced it had arrested the leader of the local Islamic State affiliate, which could be a significant blow to the group that had just re-escalated attacks on Kabul in recent weeks. Meanwhile, in Turkmenistan rare demonstrations against a shortage of government-subsidised food products were dispersed when authorities handed out free bags of flour to demonstrators. The incident could indicate a return to previously seen food shortages in the country. Amid the COVID-19 pandemic, Ashgabat’s deepening economic woes are only to worsen.
Europe: UK prime minister hospitalised but remains in charge; opposition elects centrist leader
Key Risks: political uncertainty
Britain’s main opposition party, Labour, finally has a new leader after a four-month long process, with centrist candidate Keir Starmer handily securing the post and replacing outgoing far-left leader Jeremy Corbyn, who led the party to its worst electoral drubbing in decades in December 2019. Starmer must work to rebuild the party even as it remains divided over Brexit and is likely to purge many of Corbyn’s allies, expelling them from the party for their handling of allegations of growing anti-Semitism under Corbyn’s leadership. Boris Johnson’s Conservatives have an 80-seat majority and elections are not due until end-2024, but Johnson’s hospitalisation on 5 April over COVID-19 risks considerable political turbulence in the short term.
MENA: OPEC+ agreement possible; delays to government formation expected in Israel, Iraq
Sectors: oil & gas; all
Key Risks: political instability; civil unrest; economic
An OPEC+ meeting, delayed two days to 8 April, may bring an oil production cut agreement between Riyadh and Moscow, effectively halting the oil price slide which began in early March. Israeli parliament speaker and previous opposition bloc leader Benny Gantz will request approval for a two-week delay to government formation, initially touted for before the Passover holiday, due to complications over COVID-19. The delay also reflects infighting and politicking as Gantz attempts to form a unity government with Prime Minister Netanyahu, especially after three elections in a year. The delay will likely be approved. Iraqi prime minister-designate Adnan al-Zurfi said he will announce a cabinet by 15 April. Nonetheless, without the support of Shi’ah factions who have openly rejected his candidacy, this looks unlikely. Government formation will protract, delaying much-needed decision making to tackle COVID-19.
Sub-Saharan Africa: Mali’s opposition leader in captivity; violence expected during parliamentary election’s second round
Key Risks: terrorism; internal conflict; political violence
In Mali, eight members of the main opposition party, the Union for the Republic and Democracy, were released following their abduction by suspected Islamist militants outside Koumaira, Timbuktu region, on 26 March while campaigning for the 29 March parliamentary elections. Opposition leader Soumaila Cisse remains captive, though negotiations are underway for his release. Cisse’s abduction was the first of a politician of this rank. No group has publicly claimed responsibility for the kidnapping. However, it is believed that the group was abducted by the al-Qaeda-affiliated Katiba Macina, one of several Islamist outfits operating in central and northern Mali. The elections were marred by multiple violent incidents in the central and northern regions, including a roadside bomb attack which killed nine people. Further violence is expected if the 19 April second voting round proceeds as scheduled.