Americas: Creditor talks set to continue after Argentina’s ninth sovereign default
Key Risks: sovereign default
In Argentina, creditor groups were approached by the government to sign a non-disclosure agreement to continue debt restructuring negotiations. The move came a day after the country defaulted for the ninth time on its sovereign debt after missing a US$503m interest payment in three dollar-denominated bonds due on 22 May, when their 30-day grace period expired. Creditors are unlikely to accelerate the debt as the government has vowed to present amendments to its original proposal after receiving creditor counter proposals. The deadline to reach a deal, which has been extended twice and is now set for 2 June, will likely be once again extended in an attempt to avoid lengthy litigation and an unruly default, an option creditors will be increasingly prone to resort to should an agreement not be reached over the coming weeks.
Asia Pacific: Protests resume in Hong Kong amid proposed national security law
Key Risks: political stability; civil unrest
On 24 May thousands of pro-democracy demonstrators in Hong Kong protested Beijing’s planned national security law for the city. The new legislation, expected to pass on 28 May, authorises the NPC Standing Committee to craft a security law, effectively by-passing the city’s legislative council. Demonstrations are expected to continue as pro-democracy protesters have urged to disrupt the second reading of the national anthem bill, which seeks to penalise those convinced of insulting the Chinese national anthem. The debate is set to take place on 27 May. Many are suggesting to surround the city’s legislative council in a way similar to last year’s demonstrations that led to the eventual cancellation of the extraction bill. While Chinese officials have sought to ease concerns about the new law, this is unlikely to tame protesters. Further social instability, unrest and associated violence is expected.
Eurasia: Taliban and Afghan government achieve three-day ceasefire; hostilities could continue
Key Risks: war on land; political stability; civil unrest
A three-day cease-fire that started on 24 May between the Taliban and the Afghan government to mark the Eid al-Fitr holidays is mostly holding out across the country. The cease-fire came after a fortnight of increased violent attacks since the peace process collapsed on 12 May. With a power-sharing agreement reached between rivals President Ashraf Ghani and Abdullah Abdullah, who takes a lead role in negotiations, the government hopes to refocus efforts on restarting the peace process. On 26 May the government announced the release of 900 Taliban prisoners with a further 1,000 earmarked for later in the week. The good will gesture will hope to further reinvigorate the peace process between the two sides. However, previous cease-fires have not been extended. There is a significant risk that fighting could resume once the ceasefire period is over.
Europe: Spain’s prime minister to announce minimum income scheme
Key Risks: recession; fiscal stability
On 23 May Spain’s Prime Minister Pedro Sanchez laid out the country’s next steps for overcoming the COVID-19 crisis, including a resumption of international tourism from 1 July. He also said that the government-guaranteed minimum income scheme that his Socialists and the leftist coalition partner Podemos have agreed would be announced in the coming week. Sanchez’s pledge of EUR3bln to the programme indicates it could only be used to support those most at need, but he may announce efforts to seek to expand it. The move will face a major challenge in the legislature given that the ruling coalition lacks a majority and would require a deal with smaller regional parties to advance such a measure. The European Commission is set to propose new pan-EU environmental and corporate levies to help finance recovery from COVID-19 that will certainly prove controversial.
MENA: Russian mercenaries evacuate Libya; unrest, COVID-19 surges in Iraq
Sectors: oil & gas; all
Key Risks: political instability; civil unrest; contract frustration
Hundreds of Russian military contractors from Wagner group have reportedly been evacuated by Moscow from Bani Walid airbase from 24 May after the Libyan National Army (LNA) withdrew from Tripoli’s frontlines on 20 May. The move continues the sharp reversal of LNA Commander General Khalifa Haftar’s fortunes after losing key sites to the GNA over recent weeks. The loss of organised military advisors and implied Russian support alongside Tripoli positions weakens Haftar’s negotiating position and may enable a return to negotiations. Iraq has requested emergency assistance from NATO’s civil emergency response to combat COVID-19 amid the increasingly rapid spread of the virus as hospitals are overwhelmed. Iraq has significant numbers of displaced persons and refugees housed in dire conditions without basic water or sanitation. COVID-19 overlaid on a lack of basic health or financial resources will further cripple the country.
Sub-Saharan Africa: South Africa takes further steps toward reopening
Key Risks: travel restrictions; business restrictions; economic crisis
South Africa’s President Cyril Ramaphosa announced a further easing of the nationwide COVID-19 lockdown from 1 June. The country will move from level four to level three of its five-level lockdown system removing, among other restrictions, a curfew from 20:00hrs to 05:00hrs local time, a ban on outdoors exercise and allowing the sale of liquor. Apart from funerals, all non-work-related private meetings and gatherings will remain banned. Ramaphosa said the move would allow the economy to return to full capacity. Strict lockdown measures have been enforced since 23 March to stem the spread of COVID-19, which has infected 22,583 people and killed 429 in the country so far. Restrictions could be reinstated at short notice should the infection rate resurge.