Tensions are rising at an accelerated pace after the terrorist attack in Kashmir, with several Indian civilians killed.

If India's suspension of the Indus Water Treaty takes place, it would be considered an act of war, according to Pakistan.

Our base case is that international pressure will help deter a broader escalation, leading to a negotiated settlement between the neighbouring countries.

However, the risks for the credit in the escalation scenario are very large, especially given that the impact on bond prices has been limited so far.

We therefore see an unattractive risk/reward trade-off and downgrade our recommendation to SELL from BUY.

Global uncertainty remains, affecting oil prices, which in turn affect Angola's finances. Nonetheless, while concerning, current prices don’t represent a fiscal crisis yet.

Angola assumed an oil price of USD/bl 70 in its 2025 budget, nonetheless, there is space to proceed with expense cuts if oil prices remain under that threshold.

We left our fiscal estimations unchanged, with a budget deficit of 2.9% of GDP and a primary surplus of 3.2%, with downside risks related to lower-than-expected non-oil revenues.

The government discarded another IMF loan, but we believe that they opted to leave that door open as they cut fuel subsidies one month ago.

Likewise, another IMF program is very likely if oil prices get close to USD/bl 60, Angola’s fiscal breakeven price.

With a more stable landscape and potential funding, if needed, price could return to pre Liberation Day levels, which is why we change our recommendation from SELL to HOLD.

With growth of 3.4% YoY in the fourth quarter, the economy closed 2024 with an expansion of 2.6%, slightly below our estimate of 2.7%, driven mainly by public consumption and investment. 

Remittances rose by 15% YoY in February, although they could moderate in the coming months due to U.S. immigration policies. 

Fiscal consolidation efforts under the IMF program could limit economic growth in the short term. 

El Salvador deepens its alliance with Washington but remains vulnerable to the 10% tariff and international trade tensions. 

HOLD: The combination of ongoing fiscal consolidation efforts and a light Eurobond amortization schedule over the coming years supports yields below its credit rating peers, even in the absence of further short-term positive catalysts.

The IMF decreased its global growth forecast to 2.8% in 2025 and 3.0% in 2026 (-0.4 pp and -0.3 pp vs. the October edition).

The Middle East and Central Asia was the bloc with the largest downward revision (-0.9 pp in 2025), followed by Emerging & Developing Asia and Latam & the Caribbean (-0.5 pp in both cases).

Emerging & Developing Europe suffered a modest -0.1 pts revision for 2025, while Sub-Saharan Africa was negatively revised by 0.4 pts.

Despite some easing since April 2^nd, the new series of tariffs announced by the US and countermeasures by China are a major negative shock to growth.

Additionally, the uncertainty associated with these measures has hurt the economic outlook significantly.

The global context looks adverse for oil-dependent countries like Trinidad and Tobago, as oil and gas are major sources of external and fiscal resources for the country.

Fiscal year 2025’s budget suggests a 2.9% fiscal deficit, but with the recent oil price decline, we estimate it could reach 4.3%.

If this wasn’t enough, the US revoked licenses to develop the Dragón field in conjunction with Venezuela.

SELL: The negative news flow added to the weakening of the country's fundamentals, resulting in an unattractive risk/return profile.

Despite US-led efforts, peace talks between Russia and Ukraine remain stalled, with Trump’s administration taking a cautious stance to preserve negotiation space, while Russia leverages a call for Ukrainian elections to delay a ceasefire.

Ukraine’s GDP grew by 2.9% in 2024, a notable slowdown from 2023, driven by war-related disruptions in agriculture, energy, and retail sectors, while mining showed signs of recovery.

Economic growth in 2024 was underpinned by strong household consumption, investment, and exports, with wages surpassing prewar levels due to labor shortages; industrial production remained relatively stable despite year-end softening.

We revised our growth projections down to 2.6% amid continued war, infrastructure damage, external aid uncertainty, and unresolved geopolitical tensions. Although we think that Russia and Ukraine will reach a peace agreement this year, we formulate an alternative scenario of a prolonged war that poses downside risks to our 2026 GDP forecast.

BUY: After a sharp drop in valuations amid ongoing ceasefire uncertainties, we like the risk/reward proposition as bonds should rebound if a new peace plan is implemented. 

The IMF approved a USD 20 bn, 48-month EFF with an upfront USD 12 bn disbursement. The IDB and World Bank also approved funding, which takes the total expected inflows for 2025 to USD 23 bn.

A new FX regime was launched, removing most capital controls and ending with “dollar blend” system. It allows the ARS to float within bands, which were set at ARS 1,000 to ARS 1,400 as a starting point.

BCRA interventions are permitted at the bands and within them to purchase reserves. The bands will widen by 1% monthly, gradually losing relevance as the system shifts towards a free float.

With the implementation of a new exchange rate regime and a robust economic program supported by the IMF and other multilateral institutions—bringing substantial financial firepower—we now view the risk-reward profile as once again compelling. We switch to BUY from HOLD.

Noboa decisively defeated Correísta candidate Luisa González, winning with 55.7% of the vote to her 44.3%, and preventing the widely expected worst-case scenario from materializing.

The victory was shaped by a mix of effective campaigning, improved electoral safeguards, increased turnout, and a series of late-campaign setbacks for González. Noboa also made significant gains in some regions historically associated with the Correísta vote.

Before the election, we switched our recommendation tactically from HOLD to BUY, noting overly pessimistic valuations and an attractive risk/reward setup.

Bonds have rallied almost 30% against Friday and have gained more than 13 pts on average, but the yield curve remains in the 15-20% range.

BUY: Despite the strong gains in the early session, we see room for further upside driven by momentum. However, we will monitor prices for a potential reassessment once the market settles, as we are structurally more pessimistic about the outlook in the longer term.

Costa Rica grew 4.3% in 2024, surpassing both our estimate (4.2%) and that of the Central Bank (4.1%), despite insecurity and social and political tensions. 

Foreign direct investment rose by 14%, reaching USD 4.3 bn (4.5% of GDP), with dynamism in manufacturing, tourism, real estate and services. 

Inflation rose from 0.8% in December 2024 to 1.25% in February 2025, suggesting a gradual reversal of the deflationary trend seen in the last year. We anticipate inflation to remain contained but gradually rise. 

We project growth of 4.1% for 2025, with risks centered on political stability, the international environment, and the fiscal response to growing social demands. 

President Chaves' popularity fell 9 points, complicating his ability to transfer support to a successor ahead of the 2026 elections, especially considering the criminal charges filed against him. 

SELL: The global environment limits even further the upside potential of the already tight Eurobond yields while amplifying their downside risks, offering an unattractive risk/reward proposition. 

Markets reacted sharply to Trump’s reciprocal tariffs announcement but then bounced up partially after the announcement of the 90-day pause.

Among the countries we follow, the hardest hit were Angola and Sri Lanka, while Honduras, Guatemala, Jamaica, Trinidad & Tobago, and Costa Rica were the least affected.

Notably, names such as Ecuador, Venezuela, Ucrania and Lebanon also posted large losses, but there are idiosyncratic factors that muddle the interpretation of the pure shift to a risk-off stance.

We change our recommendation on Angola from HOLD to SELL given the liquidity pressures and its oil dependence.

For Nigeria and Ghana, we change our recommendations from BUY to HOLD as, despite commodity dependence, liquidity pressures remain low.

We recently changed Ecuador to BUY from HOLD due to idiosyncratic reasons, as we see the upcoming run-off as the most important driver for the credit.

The Central Administration of Statistics (CAS) released GDP figures for 2021. The economy grew 2% after the 24.6% contraction seen in 2020.

CAS also released a methodological note that warns of the challenges behind compiling national accounts in a context with multiple FX rates and a high margin of error.

We incorporated this data and revised our GDP forecasts for 2022 and 2023. Likewise, we downgraded our 2024 estimations from a 1.7% contraction to a 4.0% contraction; but upgraded our calculations for 2025 with a slight decline of 1.1%.

Geopolitical tensions rose during March, with new Israeli airstrikes in Southern Lebanon threatening to end a fragile truce that started back in November and constraining economic activity.

BUY: After the latest sell off, we observe PDI-adjusted prices at exceptionally low valuations. While we acknowledge that Lebanon’s recovery values are likely to be among the lowest in historical terms, we still see compelling value at current levels.

Ecuador faces an existential choice between President Daniel Noboa and Correísta candidate Luisa González.

Noboa represents continuity, while González poses significant risks to fiscal consolidation and the IMF program, as well as debt sustainability and the future of dollarization. 

Regardless of the outcome, no party has a clear majority in the National Assembly, which would make governance dependent on alliances and negotiations. 

Our polling average puts Noboa marginally ahead (+0.2 pp) but the eventual outcome remains highly uncertain.

We see roughly even chances for both candidates, with a 55% likelihood of Noboa coming out on top. 

We think the market is overestimating the likelihood of a González victory and thus see the risk-reward profile as skewed to the upside, given prices close to recovery values. We switch our recommendation from HOLD to BUY.

Our EMFI Core Index lost 2.4% in March, with 4 names rising, 6 holding steady, and 13 losing ground. 

BOLIVI (+5.5%), VENZ (+3.0%), and HONDUR (+1.2%) were March’s top performers, while LEBAN (-15.4%), UKRAIN (-12.0%), and ECUA (-8.1%) showed the worst results.  

Over the past month, we closely monitored the ongoing liquidity issues and currency crisis in Bolivia, peace negotiations in Ukraine, and developments in the Ecuadorean presidential elections. 

We also analyzed the political turmoil in Turkey, assessed the escalation of the conflict in Lebanon, and reevaluated both sovereign and sub-sovereign bonds in Argentina. 

We upgraded our recommendation on GUATEM and HONDUR to BUY based on relative value considerations. We also downgraded BOLIVI to SELL, as we reappraised the likelihood of a near-term credit event. 

After two years of contraction, Sri Lanka’s economy expanded by 5% in 2024, driven primarily by industrial growth and fiscal reforms. 

The industrial sector (+2.8%) and services (+1.5%) were the main contributors to economic expansion of 5% in 2024. Tourism showed signs of recovery in volumes but earnings remained below 2018 levels.

Fiscal consolidation efforts boosted tax revenues, but achieving the ambitious 2025 targets remains a challenge. 

Declining production in key crops such as rice, tea, and coconut has led to rising food prices, posing a downside risk to economic stability and our 2.9% 2025 growth forecast.

HOLD: Both Macro and Governance Linked Bonds are suffering from global volatility, but positive macro performance suggests opportunities in the macro-linked instruments.

The FY 2026 budget is more of the same, following Egypt’s slower-than-expected fiscal consolidation, according to the IMF.

The official budget projects an overall deficit of 7.5% of GDP with a primary Surplus of 3.9%.

In our view, the government's assessment is somehow conservative, and we forecast a fiscal deficit of 6.5% of GDP and a primary balance of 4.9%, driven by stronger revenue performance and further control in spending.

The Cabinet-approved draft did not introduce any major changes to revenue policies (e.g., the VAT law amendment), although it aligns with the IMF’s goal of securing a 4% primary surplus.

HOLD: Given the mix of bilateral and multilateral allies' support and the worryingly high interest burden, we see the risk-reward proposition as fairly balanced.

On April 13^th, Ecuador goes to crucial presidential election run-offs, in which incumbent Daniel Noboa faces correísta Luisa González.

While Noboa is the market’s preferred option, bond valuations suggest investors perceive González as having a stronger chance of winning.

Bond prices are likely to react binarily to the runoff; we expect a Noboa victory to result in 50% gains and a González victory to lead to 22% losses.

We assess that the market is overestimating the probability of González winning, even if we do believe this outcome is marginally more likely than continuity.

Given current valuations, we view the risk-reward profile as skewed to the upside on a risk-neutral basis, but given the increasing risks and expected volatility, we maintain the HOLD recommendation for the moment.

President Arévalo’s popularity has declined with slow policy implementation, political tensions, and social protests. 

Despite corruption scandals in his cabinet, Guatemala has recorded a slight improvement in the latest Corruption Perceptions Index due to timely removals. 

The government rolled back some policies such as compulsory car insurance and waste management regulations after protests erupted. 

Macroeconomic fundamentals remain strong, but governability challenges and high-level corruption perception could weigh on the Arevalo administration.

BUY: Guatemala’s stable liquidity and solvency indicators remain attractive, with no immediate credit risk. Given the current uncertainty, we favor bonds on the short end of the curve. 

Angola’s economy relies heavily on its oil sector, which accounts for 95% of its exports and 60% of its fiscal revenue.

The credit will face liquidity pressures in the upcoming years, with annual debt service averaging USD 13 bn until 2029 ,  including USD 9.5 billion in external debt.

The intention of the US to curb inflation by lowering energy prices would probably affect Angolan export prices.

If Brent falls to an average of USD 60 in 2025, GDP growth would be reduced to 1.1% from 2.2%, while exports and fiscal revenue would decline by 15% and 13%, respectively.

This would worsen its liquidity ratios, with the external debt service-to-exports ratio rising to 30% and the debt service-to-revenue ratio to 49%.

The debate between Daniel Noboa and Luisa González was marked by attacks rather than substantive proposals, deepening political polarization.

González accused Noboa of having ties to criminal organizations, while Noboa linked her to a corruption case and criticized her stance on dollarization.

With the runoff election approaching, many voters remain undecided, which in our view would potentially lead to a higher number of null votes.

The debate lacked clear proposals and was criticized for misleading data, leaving voters with little clarity about the candidates' agenda almost three weeks ahead of the runoff.

While we do not identify a clear winner in the debate, Ecuador's sovereign Eurobonds have gained an average of 2% compared to Friday’s close.

Istanbul’s mayor, Ekrem Imamoglu, was detained last week on corruption and terror-related investigation.

Previously, the University of Istanbul revoked his diploma, disqualifying him from running in the 2028 elections.

Even though Imamoglu was elected as the opposition’s presidential candidate in the CHP primary elections held on March 23.

The lira plunged by 11.0% to 41.2 USD/TRY, while Eurobonds lost 1.3%. Eventually, the central bank proceeded with a massive intervention that helped to keep the lira under the 38 threshold.

We do not believe that the government will retreat and release Imamoglu, considering Turkey’s favorable current geopolitical position.

Instead, the government will likely opt to wait for the discontent to fade away and preserve the status quo.

With TURKEY 2035 Z-spreads at 330 bps and fundamentals unchanged, we maintain our BUY recommendation. However, we will closely monitor Central Bank interventions, as prolonged activity at these levels could compromise liquidity.

Rixi Moncada (from the ruling LIBRE party), Nasry Asfura (National party) and Salvador Nasralla (Liberal party) won their parties primary elections with 92.6%, 75.7% and 58.2% of the vote respectively. 

The primary elections held on March 9 were marked by irregularities, which led to complaints to the Public Ministry against the CNE for organizational failures. 

No sudden economic changes are expected if Moncada wins, as she promoted the agreement with the IMF as finance minister. 

Despite Moncada's strong performance, 68% of voters supported opposition parties, showing a clear demand for change, however, the absence of a runoff plays in her favor. 

We believe that once political uncertainty dissipates, spread compression will follow. Combined with a 7.2% current yield, this supports our BUY recommendation

The Surinamese government is nearing the completion of its 2021 IMF program, with staff-level approval granted for the ninth and final review and the Executive Board meeting scheduled for March 24.

The IMF program has significantly improved macroeconomic indicators, with key achievements including fiscal reforms, external debt restructuring, and the introduction of a market-determined exchange rate framework.

A potential future IMF program could focus on institutional strengthening and governance improvements ahead of anticipated oil revenues in 2028, but securing a new deal depends on the uncertain outcome of the May general elections.

BUY: Despite the recent underperformance, we still like SURINM 33, while SURINM 53 gains are boosted by the oil sector growth perspectives.

The Treasury confirmed that fiscal performance remains strong, accumulating 0.4% and 0.1% of the GDP primary and overall surplus as of February.

After hitting rock bottom in April, economic activity is experiencing a V-shaped recovery, closing 2024 with a 1.7% GDP contraction compared to 2023.

Monthly inflation came at 2.4% in February, with core inflation accelerating to 2.9% from 2.4% in the previous month.

As of March 18^th gross FX reserves closed at USD 27.1 bn, while net reserves are estimated at USD -7.1 bn.

Although this administration's public image remains strong, it registered a 1.8% decline in February, in a poll realized before the $LIBRA scandal.

HOLD: We view current valuations as justified given the risks associated with low and declining net international reserves and the president’s weakening public image ahead of the legislative elections.

The IMF’s first review of Pakistan’s EFF program mission assessed performance until December 2024, with a USD 1 bn disbursement subject to the Executive Board’s approval.

Pakistan exceeded targets on international reserves and the primary balance, but missed several indicative tax revenue targets, resulting in a PKR 600 bn (USD 2.1 bn) shortfall.

Structural reforms faced delays, including the introduction of an agricultural income tax, SOE governance amendments, and the privatization of two electric distribution public companies (DISCOs), while the Tajir Doost tax scheme failed, meeting just 1% of its original target.

Despite the mixed performance, we believe the IMF will approve the first review with waivers of nonobservance, introducing modifications to unmet targets.

Facing liquidity challenges and a high risk of default, Bolivia rely on its gold reserves and public sector debt holdings to stay afloat. However, legal barriers and political instability hinder its repayment capacity. 

Rumors of forced dollar conversions, trade restrictions, and a lack of transparency in official data further increase concerns about Bolivia’s willingness to pay. 

Our base case scenario includes a Eurobond reprofiling and we estimate an average recovery value (RV) of 62c, suggesting a 7% downside from current levels. 

Market pricing currently reflects a 49.1% probability of a credit event, down from a high of 64.4% earlier this year, indicating a partial improvement in sentiment. 

We see more headwinds than positive catalysts on the horizon given the combination of high bond prices and prevailing liquidity issues, which has led us to revise our outlook from HOLD to SELL. 

The current IMF program with Zambia is set to end in October, and authorities are already considering requesting a new one, despite the looming 2026 general elections.

Zambia’s current program performance has remained satisfactory, in the IMF’s words, complying with most of the targets and reforms contemplated.

Authorities have struggled to meet the targets involving the floor of revenues and social spending, and clearing expenditure arrears, which amounted to 12.1% of GDP when the program started.

Likewise, inflation remains stubborn and the FX rate has been intervened by authorities throughout the last year, diminishing progress in cumulating international reserves.

While there is still work to do, which could be tackled in another program, we believe it is unlikely that the IMF will grant a new deal before the definition of the political landscape in 2026.

HOLD: The recent volatility affected Zambian assets, creating some room for ZAMBIN 33 yield to compress below 10% again if a more friendly environment emerges.

BUENOS 37 led 2024 performances with a 109% total return, followed by Chaco (71%) and Río Negro (69%).

La Rioja was the only province with negative returns in 2024, as it defaulted in February, failing to pay a USD 16 mn amortization and remaining in default afterward.

Córdoba, Buenos Aires, Buenos Aires City (CABA), and Neuquén face the highest Eurobond debt service in 2025, but all remain at manageable levels.

CABA, Córdoba, and Neuquén are exploring new issuances in 2025 amid a favorable economic outlook and ongoing national negotiations with the IMF.

BUENOS 6.625% 37 and PDCAR 27 look attractive, and new issuances from key provinces might be interesting opportunities.

The IMF finally approved USD 1.4 bn, 40-month EFF for El Salvador, after 4 years of on-and-off negotiations and much speculation.  

There are latent implementation risks associated with the need to balance budget consolidation efforts with easing the economic and social impacts of austerity. 

The program could also be put at risk if Bukele continues purchasing Bitcoin, which is banned under its terms. 

HOLD: The combination of the fiscal consolidation efforts and a light Eurobond amortization profile for the next few years justifies the low yield relative to peers, even if we see no further short-term positive catalysts.

With the help of the IMF and other official creditors, Egypt is navigating a challenging geopolitical landscape due to regional conflicts.

Given the high financial needs and interest burden the name suffers, with interest consuming around 70% of revenues, the name needs to maintain a constant and sustainable high primary surplus.

HOLD: Egypt is fairly priced more in line with “CCC+” credits rather than those in the “B-” bracket, as its underlying solvency and liquidity fundamentals remain weak.

The government keeps moving forward, with an IMF team visiting the country throughout this week in a fact-finding mission.

Beyond getting a deal with the IMF, we are awaiting a new financial restructuring plan for the banking sectors, in which the government will address the issue of FX deposits.

Deposits before the 2019 crisis exceeded USD 169.0 bn but central bank data shows that they have declined to USD 89.4 bn, as of February 2024.

The last financial restructuring plan was leaked in 2024, and it represented a positive evolution from past versions as it introduced several suggestions coming from the IMF.

Nonetheless, it still had its flaws, posing concerns about financing and economic outlook.

After a six-month uninterrupted rally, current valuations have reached our estimated recovery levels for a hypothetical restructuring. However, given the strong market momentum, we maintain our BUY recommendation.

Tensions have escalated between Guyana and Venezuela after the Guyanese government denounced a Venezuelan navy’s incursion near an ExxonMobil oil facility.

We believe the Maduro regime is unlikely to take military action against Guyana.

We believe the Venezuelan government will continue claiming the disputed area through non-military measures, such as holding elections in the Essequibo region.

We perform a relative value analysis on the key macroeconomic, solvency, liquidity, and financial metrics for Central American countries that we cover using IMF WEO data. 

We see a high probability of a credit upgrade for Guatemala in the near term, as it is the only country in the region that combines strong fundamentals with a clear institutional framework. We upgrade our rating to BUY. 

We upgrade Honduras from HOLD to BUY, supported by solid financial ratios and attractive relative yields. With its high carry and room for spread compression, we turn constructive on the credit. 

Costa Rica appears expensive relative to peers. Given its limited relative value, we reaffirm our SELL recommendation. 

After an exceptional 2024 performance, we maintain a HOLD rating on El Salvador, as the credit is now trading below the median yield of the B-rated tranche.  

Inflation has maintained its decreasing trajectory, coming in at 12.8% in February from 23.9% in January.

Such performance is mainly explained by a base effect, as the monthly inflation in February 2024 was unusually high (11.4%) following the devaluation of the EGP that took place.

We acknowledge the risk of higher inflation in the next months due to the seasonal effects during Ramadan and uncertainty for global and regional outlook coming from US protectionism and a weaker pound.

However, we remain firm with our current forecast of inflation closing the fiscal year at 14.2% and the calendar year at 14.4%. 

A heated meeting between Trump and Zelensky at the White House escalated into a clash, ultimately failing to sign a mineral deal and advance on peace negotiations.

Following the meeting, the Trump administration cut all US military aid to Ukraine, prompting European leaders to reaffirm their commitment to supporting Ukraine.

European nations announced new military assistance packages, and the European Commission introduced the ReArm Plan, potentially mobilizing up to USD 849 bn to strengthen European security and aid Ukraine.

With the US assistance on hold, Ukraine faces two main scenarios: leveraging European support to secure a resumption of US aid or continuing the conflict with limited EU funding, increasing the risks of military setbacks.

Our EMFI Core Index gained 0.2% in February, with 18 names rising, 3 holding steady, and only 2 losing ground. 

LEBAN (+16.1%), VENZ (+10.7%), and UKRAIN (+6.0%) were February’s top performers, while ECUA (-16.5%) and ARGENT (-5.5%) were the only negative performers of the month. 

Over the past month, we closely monitored the much-awaited formation of a new government in Lebanon, peace negotiations in Ukraine and developments on the Ecuadorean presidential elections. 

We also dove into market expectations implied by UKRAIN contingent bonds, concluding that the market is pricing in a significant outperformance vs IMF baseline forecast. 

We upgraded our recommendation on TURKEY to BUY, downgraded ARGENT to HOLD and downgraded ECUA to SELL in the immediate aftermath of the elections (but switched back to HOLD after the selloff materialized). 

Chaves' push for a referendum has failed due to legal obstacles, and there is speculation that he may resign before July to stand as a deputy and promote a constitutional reform. 

He is seeking to change the balance of power in the Legislative Assembly, where his party currently has only 9 out of 57 seats. 

The ruling party is highly popular, with Luis Amador one of the favorite candidates with 7%, and other former ministers close to Chaves also in the running, although without confirming their candidacies. 

The future of the ruling party is uncertain due to legal challenges. Chaves could therefore support a candidate from another party, but his opponents see this as a strategy to obtain immunity. 

SELL: While fundamentals seem strong, the name is yielding at only 195 Z-spread, which seems expensive comparing it to peers.  

Following allegations of fraud in the 2019 presidential elections and delays in the judicial elections, the electoral body is focused on ensuring timely elections and transparent results.

Considering the TSE's recent statements, we believe that Morales won't be able to run for president.

The election outcome remains highly uncertain, given the deep fractures within both the ruling party and the opposition.

Regardless of the winner, we expect the next administration—whether MAS or the opposition—to pursue much-needed economic reforms.

HOLD: We anticipate a moderate risk of an imminent default in 2025 and modest downside potential at present valuations. However, there is also a dearth of catalysts that could drive upward movement in the near term.   

The 2025 budget draft was approved by the parliament; it projects only a marginal reduction in the fiscal deficit from 6.8% of GDP in 2024 to 6.7% of GDP in 2025 and a primary surplus of 2.3% of GDP.

The government aims to meet IMF conditions, including a 15.1% revenue-to-GDP ratio, helped by strong economic growth.

The budget relies on tax revenue growth (driven by previous tax hikes), without major expenditure cuts.

The government’s reliance on tax revenues and domestic borrowing to finance the deficit poses downside risks, especially if revenues fall short and spending remains high.

Pakistan is advancing on IMF reforms under the EFF agreement, with the next review scheduled for March 3–15, 2025.

Total investment grew by 25.6% YoY, with FDI surging 56.2% to USD 1,523.6 mn between July and January, driven by investor confidence in the power and oil sectors.

Pakistan signed a USD 2 bn investment MoU with Azerbaijan and is deepening ties with China through CPEC, while a new energy policy aims to attract USD 5 bn in investment.

FDI inflows face risks from US-Pakistan relations and tariff reciprocity, while domestic challenges include exchange rate stability, tax incentives, transparency, and bureaucratic inefficiencies.

The current account deficit shrank by 75.1% from USD 39.8 bn in 2023 to USD 9.9 bn in 2024.

Such a result is mainly explained by lower imports, aided by the fall of energy imports which fell 0.7 pp to 5.4% of GDP.

Likewise, tourism revenues posted an all-time high, marking a golden year for the country.

Gross reserves keep rising and reached a peak of USD 173.2 bn, with net reserves standing at USD 77.7 bn, as of February 14.

We expect the current account deficit to widen this year from 0.8% of GDP to 1.6%, but this remains below the 10-year average of 2.9%.

BUY: Good macro performance and solid solvency and liquidity indicators back a potential credit upgrade this year and leave space for further spread compression.

The Constitutional Court ruled four budget articles unconstitutional, reducing the initial deficit from 3.1% to 2.9% of GDP, but Congress responded by approving a GTQ 4.2 bn (USD 535.4 mn) expansion that pushed it to 3.3% of GDP. 

While the government projects a 3.3% deficit, our baseline scenario estimates a lower 2.8%, considering past execution delays.  

Despite ongoing controversy, the 2025 budget could boost infrastructure spending and economic growth. However, the risk of further legal challenges remains, potentially delaying execution. 

The IMF and Fitch Ratings also view the fiscal expansion positively, emphasizing Guatemala’s low debt-to-GDP ratio (27.2%) as a key factor enabling increased public investment. 

HOLD: We believe that the current Z-spreads are justified given the combination of healthy solvency and liquidity ratios, but climate-related and Trump policy risks. 

Milei's endorsement of a crypto scam last Friday, followed by ineffective government responses and new corruption allegations involving his sister, have unsettled the political landscape.

While the legal implications remain uncertain, the potential damage to the president's public image is yet to be fully realized.

Given the heightened political uncertainty in an election year and the possibility of further escalation of these accusations, we are revising our recommendation from BUY to HOLD.

Angola’s average oil output in 2024 increased by 8.9% to1,124 tbd in 2024, up from 1,096 in 2023, right after its withdrawal from OPEC.

Driving this performance is the “Incremental Production Initiative”, which comprises the assessment and reactivation of closed wells and the revision of concessions while awarding new ones.

We believe that keeping oil output over one million barrels per day until 2027 is achievable. Nonetheless, doubling production thereafter still sounds like a distant goal.

There are several oil projects scheduled to come online between 2025 and 2030, but most of them remain in the early stages.

HOLD: Angola continues to secure funding to address liquidity pressures in 2025. The credit offers one of the most attractive current yields within the high-yield universe, presenting a balanced risk-reward profile.

The outcome of the May 25 elections will determine who oversees Suriname’s future oil revenues.

Under Santokhi’s administration, GDP growth stabilized at 2%-3%, inflation declined to 9.6%, and the fiscal deficit was reduced to 1.6% of GDP, alongside a successful debt restructuring.

Santokhi is trying to revamp his popularity with new spending measures and continued electricity subsidies, however, the recent passing of former President Bouterse could strengthen support for the NDP.

A potential NDP comeback raises concerns about fiscal sustainability and oil revenue management, with early polls showing the party in the lead.

BUY: Despite the considerable spread compression, SURINM 33 still offers an attractive current yield. Meanwhile, updates on Block 58 could provide an upside for SURINM 50.

Since 2017, Ecuadorian elections have been plagued by inaccurate polling, with 2025 predictions failing to anticipate the narrow gap between Noboa (44.16%) and González (43.98%), as well as misjudging null votes and third-place results.

Polling errors are a result of statistical biases, an overcrowded candidate field, a high number of undecided and null voters, and logistical issues, including security threats limiting rural survey coverage.

Noboa’s first-round vote share was 7 pp lower than in the 2023 runoff, while González lost 3 pp, making voter shifts critical to the final outcome of the April 2025 runoff.

Due to Ecuador's unpredictable elections and the pollsters’ track record of inaccuracies, relying on polling averages rather than individual surveys may offer better insights.

Since our downgrade to SELL bonds have returned a negative 6.4%. We now view the risk-reward profile as more balanced and revert our stance back to HOLD.

The government achieved a 2.2% monthly inflation in January, the lowest since July 2020.

The Treasury also confirmed that fiscal performance remains on a strong trajectory, reporting a 0.3% primary surplus and a 0.1% overall surplus for January.

While showing great results in terms of inflation and fiscal balance, Milei is currently embroiled in a scandal related to his promotion of a memecoin.

Although we do not believe the impeachment proposed by the Kirchnerist party will advance, the impact on the president's public image remains uncertain.

Bonds with contingent value clauses were issued at a discount to their vanilla equivalents but are now trading with a 10-pt premium due to improved prospects for the credit. 

Bondholders will receive additional UKRAIN 0% 35 and UKRAIN 0% 36 bonds if nominal GDP and real GDP outperform the forecasts set in the IMF’s baseline scenario presented in the fourth EFF review. 

Bonds are pricing in the assumption that the upside clause will be triggered and nominal GDP will outperform by 5.8-6.0%. 

Given our expectation that the current momentum will continue in the short term and the room for spread tightening, we maintain our BUY recommendation on Ukraine. 

Lebanon faces another challenging year, as the ongoing war disrupts production activities and tourism while forcing the displacement of about 1.2 million people.

While there is a surging hope that the decimation of Hezbollah can lead to the election of a new president, so far there is no progress on this front, which points to another year of political vacuum.

We expect a fiscal deficit of 2.5% of the GDP vs 4.1% in the government’s budget proposal.

We anticipate a further GDP contraction of 2.1%, with inflation expected to keep decelerating but with high risks for a new depreciation of the currency amid the central bank’s interventions.

HOLD: Despite trading well above their 2-year average, bonds remain cheap, as they are below their fair value in two different models. But given the significant uncertainty on the timing and conditions of an eventual restructuring, we prefer to wait for a better entry point.

We take a look across EMFI countries in the Sub-Saharan African region through the lens of IMF WEO data.

Angola and Nigeria have negative liquidity indicators, but both are expected to muddle through. We maintain our HOLD rating on both names.

With ZAMBIN 5.75% 33 yielding 9.9% we see little room for further upside. We do expect the upside scenario for ZAMBIN 0.5% 53 to be triggered in the medium term but remain conservative. We maintain our HOLD rating for Zambia.

In Ghana, we expect the 11-year tenor, currently yielding 11.3%, to converge the 9.5% zone. The country shows good macro fundamentals and healthy liquidity/solvency indicators. We maintain our BUY rating on the name.

On October 27, former president Evo Morales claimed to have suffered an assassination attempt after his vehicle was hit by gunfire.

The government, however, denied the allegations and claimed that Evo had orchestrated the assassination attempt.

The most recent poll from Diagnosis dates from September and shows there is no frontrunner, and all candidates are well below the 50% (or the 40% with an advantage of 10 pp) needed to win in the first round.

Although the country is on the verge of collapse, Bolivian Eurobonds rallied in the month, posting a 13.4% total return to accumulate a 35.5% return YTD.

Unpopular fiscal policies implemented under the IMF’s Extended Fund Facility, including a VAT increase, have improved revenue and reduced the NFPS fiscal deficit.

We expect the NFPS deficit to shrink to 2.6% of GDP in 2024 and 1.9% in 2025, down from 3.7% in 2023. We also forecast primary surpluses of 0.2% in 2024 and 1.3% in 2025, a sharp improvement from the 1.3% deficit of 2023.

Despite the notable improvement in the fiscal balance, Ecuador’s gross financing needs remain substantial. We estimate them at USD 4.6 bn in 2024 and USD 7.2 bn in 2025.

The upcoming 2025 election brings additional risk, with ongoing power shortages potentially impacting President Noboa’s re-election bid. A victory for Correísmo could pose a large downside risk to fiscal stability and Eurobond performance.

BUY: With low cash prices and attractive current yields, we still believe that the risk reward of the credit is tilted to the upside, despite the still mediocre growth and fiscal results.

Zambia is enduring its worst drought in years, which has devastated crops and prompted an energy crisis with most of the country barely getting 3 hours of electricity a day.

GDP growth notably decelerated in the first two quarters of the year, rising 2.2% and 1.7% YoY, respectively, from 4.0% and 5.3% in 2023.

Agriculture and mining are the main contributors to such deceleration.

Private sector activity keeps contracting, as the PMI reached its lowest level since the pandemic.

All in all, we adjusted our GDP’s growth rate estimation from 4.1% to 1.9%.

HOLD: Given a yield of 9.6% for the 9-year tenor we see little room for further upside. On the other hand, we expect that the upside scenario will be triggered on the ZAMBIN 0% 53 in the medium term but remain conservative. 

Recently, IMF technical staff visited Honduras to discuss policy adjustments needed to complete the first and second reviews of the USD 822 mn program. 

The proposed 2025 budget presented in September is a significant step to strengthen public finances, as the fiscal deficit is projected at 1.7% (down from 3.9% in 2024). 

This preliminary agreement at the technical staff level will be presented to the IMF's Executive Board and will be subject to their approval in the coming weeks.

HOLD: Despite a low debt-to-GDP ratio of 45%, Honduras' reliance on government-controlled energy systems could pose risks to its fiscal stability and the name is trading among the lowest yielders of the "B-" to "B" bracket.

Recent polls reveal a two-horse race in Ghana's upcoming presidential election between the main opposition candidate, John Mahama, and the sitting Vice President, Mahamudu Bawumia.

While the race remains tight, we see Mahama winning as more probable, not only because the most credible survey points that way, but also because of Bawumia’s involvement in the current government, which is implementing highly unpopular economic reforms.

In an interview with Reuters, Mahama said he would renegotiate the IMF deal if elected.

However, we think a potential Mahama victory represents a low risk of a complete withdrawal from the program, and expect him to maintain a friendly relationship with the fund.

BUY: With yields in 11.2% range for the 11-year tenor, we see room for upside to the complex as we think it should compress to the exit yields seen in Zambia.

The Caribbean has grown at an average rate of 2.6% in the last 10 years, but the Bahamas (1.3.%), Barbados (0.9%), and Jamaica (0.9%) underperformed.

Barbados has received the least damage to its economy as a result of hurricanes, whereas Jamaica and the Bahamas have been more affected.

Given the low long-term growth track record for these countries, it is hard to see them growing at fast rates while they consolidate their fiscal accounts.

Ukraine’s 2025 draft budget reflects expectations that the war will continue into 2025 and highlights the need for foreign funding to support military and economic efforts.

We expect recent tax reforms to raise tax collections to 69.5% of total revenues in 2025, from 50.4% in 2024.

We also expect expenditures to fall from 61.6% of GDP in 2024 to 56.2%, owing to cuts in pension funds, subsidies, and social security, as well as a more restrained approach to military spending amid uncertain financing.

With high uncertainty on foreign funding and the development of war, we expect the fiscal deficit to improve from 18.2% in 2024 to 15.2% of GDP in 2025, though financing needs could be left with a USD 8 bn gap.

BUY: Without ignoring the war risks, Ukraine's low short-term Eurobond debt service and attractive yields offer a compelling risk-reward opportunity. 

The IMF raised its global growth forecast to 3.2% in 2024 (+0.1 pp vs. the April edition) and maintained its 2025 projection at 3.2%.

Middle East and Central Asia and the Sub-Saharan Africa were the regions with higher downward revisions (-0.3 and -0.2 pp).

Latam & the Caribbean and Emerging & Developing Europe were both revised up by 0.1 pts for 2024.

With the global battle against the inflation almost over, the IMF highlights downside risks related to “escalation in regional conflicts, monetary policy remaining tight for too long, a possible resurgence of financial markets volatility, a deeper growth slowdown in China, and the continued ratcheting up of protectionist policies”.

After a challenging 2023, Angola is seeing improvement in macroeconomic indicators, boosted by higher oil output and prices.

In 1H24, GDP posted a 4.4% cumulative growth, which led us to adjust our forecast from 1.1% to 3.3% for the full year. However, we see this growth decelerating in 2025, with a stagnant oil production.

Inflation remained high at 29.9% in September but will decelerate due to central bank intervention on the FX rate, which has regained some ground after hitting a 25-year high.

Both fiscal revenues and expenditures show better-than-expected performance, which presents upside risks for our current forecast of 1.1% of the GDP surplus.

The current account posted a notable USD 3.5 bn (3.4% of GDP) surplus vs USD 547 mn (0.6%) seen in 1H23. We upgrade our forecast from 4.7% of the GDP to 5.3%.

HOLD: We believe 715 bps Z-spreads for the 8-year tenor and an attractive 9.8% current yield are justified given oil sector exposure and adverse liquidity ratios.

The Salvadoran government has presented its budget proposal for the 2025 fiscal year, amounting to USD 8,401.37 million, reflecting an increase of 3% in comparison with the approved 2024 budget. 

This budget marks a key shift in the country’s public finances: the commitment to achieving a zero fiscal deficit for the first time since the beginning of President Nayib Bukele's administration. 

Finance Minister Jerson Posada presented the plan to the Budget and Finance Commission, emphasizing the importance of continuing fiscal consolidation with a focus on spending efficiency and without the need for additional financing. 

With these actions, Bukele’s government is paving the way for a potential agreement with the IMF, though one of its main challenges will be strengthening mechanisms for transparency and accountability.

BUY: Liquidity concerns are greatly decreased after the reduction of front-end outstandings in the buyback operation and current yields further along the curve are at an attractive 9%.

Ghana has completed the Eurobond debt exchange, issuing 5 new bonds for a total nominal amount of USD 9.4 bn.

The offer was accepted by 98.6% of bondholders, almost all of which opted for the “Disco” option.

Fitch and Moody’s upgraded Ghana’s credit rating to CCC+ and Caa2 respectively.

BUY: With an exit yield of 10.8%, we see upside to the complex and think it should converge to the levels seen in Zambia.

In September, the NNPC increased the petrol price by 24.1% to an average of NGN 1,030 per liter, fully recovering costs, which means a total removal of fuel subsidies.

We believe that the full removal of fuel subsidies will fuel inflation in the short term. We estimate that inflation will reach 34.2% by the end of the year.

Although the FX market is currently under pressure, we believe it will ease in the following months due to lower imports of refined products.

There are downside risks related to growing social unrest, which could lead to a policy reversal. Nonetheless, we are optimistic and expect Tinubu to sustain current reforms.

HOLD: We see credit spreads in the 614-bp area for the 9-year tenor as justified given liquidity ratios while noting that the country could tap international markets to roll over upcoming maturities.

In September, the Treasury reported another overall surplus, accumulating 0.5% of our estimated GDP so far in the year.

Expenditures fell by 25.2% YoY in real terms, slightly outperforming the results of August and July.

Revenues fell only 6.6% in real terms despite the 10-pp reduction in PAIS tax,  boosted by the phenomenal revenue collection of the Wealth tax.

Despite the lack of political support in Congress, the government has managed to convince the market that it will produce an overall balance in 2024 and 2025, which has boosted the Eurobond rally.

We maintain our BUY recommendation even after the 67.2% YTD total return, as we see the risk/reward balance as still attractive.

Egypt’s inflation has increased slightly for the past couple of months, going from 25.2% in June to 26.4% in September.

Such acceleration was expected, as the impact of the recent subsidy cut that the government introduced ahead of the IMF’s EFF program went into effect.

However, we believe it to be a temporary uptick, as core inflation has kept decelerating while the currency remains market-determined.

Likewise, thanks to the increases in the monetary policy rate, the growth rate of the money supply (M1) has been decreasing from a peak of a YoY increase of 49.2% in February to 26.0% in August.

We currently expect inflation to end 2024 at 25.9%, but a base effect in 2025 will help the disinflation process despite the downside risks ahead.

SELL: With Z-spreads at 711 bps for EGYPT 33, we find the credit unattractive given the high debt and interest burden, a considerable Eurobond debt service, and worryingly high twin deficits.

The state budget for Costa Rica in 2025 amounts to CRC 9.46 tn (USD 17.19 bn or 18.0% of GDP), 1.0% higher than the approved budget for 2024. 

Sustainable revenue sources (mainly taxes) as a share of the budget increased from 69.9% to 73.1%, while borrowing decreased from 21.6% to 18.6%. 

Key sectors such as the Judiciary, Public Security, and the Ministry of Justice will receive significant allocations amid the security crisis, but other ministries will face budget cuts. 

One of the biggest challenges this year for the Costa Rican government will be balancing fiscal austerity in sectors with greater demands, such as education, against potential tensions with advocates for social benefits. 

SELL: Bonds are trading with a tight spread over US bonds and don't adequately compensate for the inherent credit risks of the country. 

The IMF approved a new USD 7 bn EFF program for Pakistan, aiming to support the country's economic recovery and stability.

We anticipate that the program will include tough economic measures such as raising tax collection, reducing government spending, and privatizing state-owned enterprises.

The government has already taken the first step by eliminating 150,000 government jobs through a combination of ministry closures and mergers.

In our view, the government's commitment to reform is positive but Pakistan is not out of the woods yet as the program entails the risk of social unrest and policy slippage.

With the IMF program on track, we like the prospects for the credit, especially for PKSTAN 25. We switch our stance from HOLD to BUY.

In line with our expectations, Total and Apache announced their Final Investment Decision for Block 58 on October 1.

The block could allow Suriname to significantly boost its oil output from the current 16 tbd to 220 tbd by 2028 under our baseline scenario.

If this forecast materializes, we see the project bringing in USD 22.4 bn in revenues during the first five years of oil production, of which USD 8 bn would go to the government.

The announcement boosted the royalties-tied SURINM 9% 50 to trade at 101c, 13 pts up MoM, but the vanilla SURINM 7.95% 33 held steady around 97c (to yield 9.0%).

BUY: With think momentum in the credit may lose some pace in the aftermath of the announcement, but remain constructive due to the potentially transformative effect of oil developments on the broader macro.

Turkey’s external accounts have outperformed our expectations, as the current account deficit has shrunk by 61.8% YTD compared to 2023.

Underlying this improvement, imports have decreased by 10.5%, while exports modestly grew by 3.3%, even if they are unlikely to meet the government’s target of USD 267 bn for year-end.

Energy imports continue to fall, driven by international prices, and have posted a YoY decrease of 6.9%, while energy exports rose 26.6%.

Tourism revenues also remain strong, as they have grown 12.5% in YoY terms. So far, the Middle East conflict has not affected tourism activities, and we believe that it will remain that way.

We upgrade our current account deficit estimation from 3.8% to 2.5% of GDP.

Despite the healthy fundamentals, we think that valuations have nearly peaked and therefore modify our rating to HOLD from BUY.

Our EMFI Core Index gained 2.0% in September, with 18 names rising, 3 holding steady, and 1 losing ground. 

LEBAN (+19.5%), ARGENT (+8.7%), and ELSALV (+7.6%) were the month’s top performers, while VENZ (-1.0%) and ANGOL (-0.1%) underperformed. 

Our Research Team analyzed the Oil & Gas industry in our commodity-producer countries, started covering Argentina´s midterm election, and investigated the fiscal situation in the Caribbean. 

We also evaluated Ecuador´s willingness to issue a new green bond and reassessed our stance on Egyptian Eurobonds. 

Ecuador's GDP shrank by 2.2% in Q2-2024 compared to the same period in 2023, displaying a slowdown driven by weaker domestic consumption and power cuts.

The Central Bank reported a 2.2% YoY decline in household consumption, an 8.2% YoY fall in investment, and a 0.6% YoY decrease in government spending.

We downgrade our baseline 2024 GDP forecast to -0.6% GDP growth, from 0.5% previously and a 0.6% YoY GDP growth in 2025. However, an alternative scenario with persistent power cuts could result in a -2.4% GDP contraction in 2025. 

Power cuts could negatively impact Noboa’s chances of reelection, but he remains the frontrunner for the 2025 general elections.

With the likelihood of Correísmo regaining power still low and the attractive current yields, we maintain our BUY rating for the name.

The Paris Club agreed to postpone debt service payments until 2027 when the IMF program is expected to conclude. 

The IMF has emphasized that a restructuring process is needed to ensure debt sustainability in the medium to long term. 

The IMF also published its latest Article IV on Ukraine and approved the second review of the EFF program, unlocking USD 900 mn in disbursements. 

We expect a market-friendly proposal for the restructuring, with negotiations starting in the first quarter of 2024. 

In the 209 sovereign restructurings since 1978, the average haircut stands at 40.5%, but this result may be deceiving.

Market or private restructurings represent 79% of the cases, yet their average haircut stands at 30.3%.

Amongst the market/private restructurings, agricultural countries represent the largest share and exhibit the highest haircuts.

The average haircut in market/private restructurings has been increasing consistently and stands at almost 49% between 2010-2019.