In October 2014, Global Evolution attended the IMF-WB Annual Meetings to conduct face-to-face meetings with government officials from emerging and frontier countries, and to discuss joint research with the IMF Research Department, including the planning of an IMF-Global Evolution Frontier Markets Research Seminar for Spring 2015.
After these talks, Ole Hagen Jørgensen, Research Director, and Kristian Wigh Jespersen, Portfolio Manager at Global Evolution, discuss in its most recent Trip Notes their impressions from the 24 country-meetings they held in seven days. “ We attended public meetings with government officials and IMF mission chiefs from 24 emerging and frontier market countries.” These are their headline conclusions:
- Angola: Good non-oil growth prospects; likely upcoming financing from WB and other donors; reduction in oil production and royalties; low risk to debt sustainability.
- Belize: Fiscal numbers in bad shape; large contingent liabilities; no strong commitment to fiscal reform; oil sector waning down; elevated risk to debt sustainability.
- Bangladesh: Prudent monetary policy; GDP revised upwards 50%; weak revenue performance; domestic political turmoil; delayed VAT reform; low risk to debt sustainability.
- Botswana: Good fiscal stance; production not diversified; growth outlook worse due to lower diamond production; accelerating credit growth; low risk to debt sustainability.
- Egypt: Impressive subsidy reforms; fiscal adjustment offset by infrastructure spending; improved revenue collection; FX flexibility needed; moderate risk to debt sustainability.
- Ethiopia: IMF program unlikely; Eurobond issuance likely; high growth; volatile inflation; prudent fiscal performance; build up of debt, but low risk to debt sustainability.
- Gabon: Increasing capital spending; business climate and electricity supply not good but improving; production needs diversification; low risk to debt sustainability.
- Ghana: Negotiations with IMF on funded program; early budget to be prepared; other donors on board; high inflation; high debt service; moderate risk to debt sustainability.
- Iraq: In civil war; Iran influence; IS Ramadi-takeover makes Baghdad-takeover easier; government safeguards oil but difficult; moderate risk to debt sustainability.
- Jamaica: Fiscal program major success; need for revenue- enhancing measures; vulnerabilities to PETROCARIBE and external shocks; moderate risk to debt sustainability.
- Mongolia: Nervous investor sentiment; too high exposure to China financing; FDI into mining is down; vulnerabilities in banking sector; moderate risk to debt sustainability.
- Mozambique: Foreign financing is a concern; proceeds from bond issuance used for elections; huge gas reserves under ground; low risk to debt sustainability.
- Nigeria: Economic impact of insurgence in the north is very low; little expected impact of elections on fiscal expenditure; good growth due to non-oil; low risk to debt sustainability.
- Pakistan: Privatization program going well; tax reform important; Minister Daar seems fiscally committed and prudent; low risk to debt sustainability.
- Paraguay: Inflation targeting implemented; a net creditor nation; VAT of 10% across income types very prudent; infrastructure challenge; low risk to debt sustainability.
- Republic of Congo: Huge fiscal buffers; good non-oil growth prospects; inefficient government spending; poor business climate; need for fiscal reform; low risk to debt sustainability.
- Senegal: Good fiscal consolidation; twin deficits; problematic fuel and electricity subsidies; low growth; manufacturing lacking; low inflation; low risk to debt sustainability.
- Serbia: Huge fiscal slippage; likely upcoming emergency- financing from WB; privatization-process well under way; high unemployment; elevated risk to debt sustainability.
- Tanzania: Fiscal deterioration; need for tax collection improvements; policy reforms moving very slowly; high financing needs; rebasing GDP; low risk to debt sustainability.
- Turkey: Huge financing needs of 25% of GDP; oil price decline beneficial to economy but risks removing reform-focus; exports drops; low risk to debt sustainability.
- Uganda: High growth; need for revenue-enhancing measures; infrastructure needs mounting; huge real interest rate; low risk to debt sustainability.
- Ukraine: No clarity on political situation, economic impact, and external financing; IMF report to come out mid-December; high risk to debt sustainability.
- Venezuela: Policy inaction; recent downgrade; 15% budget deficit; sell off in Venezuelan US dollar bonds; possible but unlikely default; moderate risk to debt sustainability.
- Zambia: President Sata dies; election and succession in question with political outlook less certain; Fiscal consolidation important; mining companies taking government to court; low risk to debt sustainability.
Global Evolution, an asset management firm specialized in emerging and frontier markets debt, is represented by Capital Stragtegies in the Americas Region.