It’s been a tough time for riskier assets in recent weeks, including emerging market stocks, bonds and currencies. But few have felt the pain as much as frontier markets, a subset of smaller and often riskier emerging economies.
Many of those frontier economies are in Africa, and are suffering from a toxic combination of tumbling oil and commodity prices, the prospect of the global economy tumbling into recession and weakening currencies which will make servicing external debt ever-more expensive.
Oil-producing countries like Angola, Ghana, Gabon and Nigeria have seen their dollar- denominated debt drop sharply, with yields of some issues shooting above 20%, indicating soaring borrowing costs. Many countries on the continent lack the financial firepower or foreign currency reserves needed to combat the coronavirus and prop up their economies, with healthcare systems already under strain.
The World Bank and International Monetary Fund on Wednesday urged official bilateral creditors to provide immediate debt relief to the world’s poorest countries as they grapple with the human and economic consequences of the pandemic.
Leaders of the Group of 20 major economies pledged on Thursday to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus and “do whatever it takes to overcome the pandemic”, expressing concern about Africa in particular. Many hope that the acknowledgement of the need to bolster global financial safety nets and national health systems will translate into action.