Despite the episode of political instability seen in March, international investor confidence recovered, with debt securities holdings growing by 10.5% between April and July.

Market inflation expectations for the year decreased slightly from 29.86% in June to 29.66% in July.

However, the consumer confidence index also declined by 1.8% MoM from 85.1 in June to 83.5 in July, driven by the depreciation of the lira and the political instability.

Despite the larger-than-expected cut in the interest rate, the central bank appears to remain committed to its inflationary goals.

BUY: A recent rating upgrade by Moody's and improving external buffers provide a positive outlook despite persisting political risks. Strong demand for recent issuances and attractive relative value support our BUY recommendation. 

The Salvadoran economic growth slowed down to 2.3% YoY in Q1 2025 (vs. 3.8% in Q1 2024), due to aggressive cuts in public expenditures. 

Deflation extended for a third month in June, we maintain our year-end inflation forecast at 1.7%.  

Foreign direct investment grew 64.7% YoY in Q1 2025, signaling a potential rebound in investor confidence. 

Remittances hit a record USD 862.9 mn in June (+29% YoY), sustaining private consumption and showing no signs of moderation. 

The proximity to the Trump administration creates diplomatic opportunities but also vulnerabilities to changes in migration and foreign trade. 

Considering these recent results, we revised our growth forecast for 2025 from 2.5% to 2.3%.

HOLD: Despite the liquidity relief provided by previous buyback operations, the country still faces a considerable debt burden, affecting its medium-term perspective. In our view, the yield is pricing these risks fairly.

In Q4 2024, the current account recorded a deficit for the first time since the 2020 pandemic.

The financial account recorded net capital outflows of USD 129 mn in 2024, significantly lower than in 2023, which reached USD 1,032 mn (-87.5% YoY).

For 2025, we forecast a continuation of the downward trend in the current account with a 2.9% of GDP surplus, mainly due to international energy prices underperforming so far in 2025, and the lack of a meaningful recovery in domestic production.

The fixed exchange rate of TTD 6.78 per USD continues to require substantial foreign currency interventions to contain demand pressures in the FX market.

SELL: We don’t like the macro dynamics, which could soon impact the credit indicators. With spreads at 185 bps, we do not find yields appealing. 

Foreign support remains critical to prevent further Russian advances and strengthen Ukraine’s position in future negotiation talks.

The EU is expanding its role through proposed long-term financial aid and a new sanctions package aimed at weakening Russia’s economy.

Delays in the deployment of military assistance could undermine Ukraine’s ability to respond effectively on the battlefield.

Given the continued war of attrition and no signs of a negotiated ceasefire being viable, we revise our baseline scenario and no longer expect a ceasefire before the second half of 2026.

We maintain our BUY recommendation, as we wait for clarity on the potential implications of Trump's statement, which could mark a turning point in the negotiation dynamics. 

Inflation came out at 19.7% YoY in June, driven by the deceleration in Food and Non-Alcoholic Beverages inflation, which was 1.2% MoM. 

The official exchange rate has remained stable around USD/AOA 912 in June, flat with respect to the end of 2024, thanks to controls imposed by the banking supervisor to avoid speculative offers on the dollar. 

The surplus in the current account fell from USD 2,077 mn to USD 601.6 mn, driven by a 13.9% reduction in exports, which resulted from lower average oil production and a drop in Brent prices. 

We have adjusted our inflation forecast upwards from 16.5% to 18.5% due to persistent inflationary pressures and significant external risks.  

Given the external risks, Angola’s Eurobonds continue to yield well above similarly rated peers, balancing out the risk-reward. We maintain our HOLD rating.

The IMF board approved Ghana’s fourth review under the Extended Credit Facility, despite the government's non-compliance with several targets by end-December.

GDP growth accelerated to 5.3% in Q1, driven by higher government and private consumption, and strong external demand.

The government is implementing significant fiscal consolidation measures, including expenditure cuts (reducing ministries, limiting budget allocations, discontinuing social programs, and auditing payables) and electricity tariff adjustments, to meet IMF targets.

Despite a strong Q1, the anticipated impact of aggressive fiscal adjustments is expected to negatively impact economic growth in the short term, but we believe robust net exports, driven by high cocoa and gold prices, will be a key mitigating factor.

BUY: Despite fiscal underperformance, the country still enjoys IMF support and better solvency and liquidity fundamentals than its regional peers.

In May 2024, a tax reform was passed with retroactive effect to January 1 of that year. The reform introduces a QDMTT and raises the overall corporate income tax (CIT) rate to 9% (from 1-5.5%)

The government closed FY2024/25 with a primary fiscal surplus of 4.3% of GDP (+0.8 p.p.) and a general fiscal deficit of 0.9% of GDP (+0.8 p.p.)

The budgeted revenue for FY2025/26 amounts to USD 2 bn, an increase of 5.5% compared to the revised FY2024/25 budget

Expenditure is projected at USD 2.03 bn, 4.9% above the previous revised budget

We adjusted our forecasts downward from a general fiscal surplus of 0.1% and a primary surplus of 4.7% to a general fiscal deficit of 0.8% and a primary surplus of 4.4%.

HOLD: The recent liability management operation improved liquidity at the expense of a worsening of solvency metrics. Overall, we see a balanced risk/reward profile with no immediate peril nor much space for spread compression.  

BdL issued Circular 169, which prohibits banks from disbursing foreign currency deposits made before November 2019 without prior approval, to ensure equal treatment among depositors.

In response to persistent economic challenges and urgent financial and humanitarian needs, BdL has revised cash withdrawal limits as outlined in Circulars 158 and 166.

Effective July 1, 2025, the monthly withdrawal cap under Circular 158 will increase from USD 500 to USD 800. The limit under Circular 166 will rise from USD 250 to USD 400. These adjustments will remain in effect for one year, with the possibility of renewal.

BUY: With PDI-adjusted prices averaging as low as 12.8 cents, we continue to believe the investment’s risk-reward profile remains attractive.

Egypt grew by 4.8% YoY in 3Q of FY24-25 compared to growth of 2.2% YoY in 3Q FY23-24, driven by a 54.4% YoY increase in exports.

The Purchasing Managers’ Index averaged 50 points in 3Q of FY24-25; however, in 4Q of FY24-25, it fell to an average of 48.9 points.

Inflation in June was higher than expected, reaching 14.9% YoY. The central bank kept interest rates stable, awaiting the effects of the VAT reform on prices.

We increase our estimate for growth in FY24-25 from 3.8% YoY to 4.2%.

HOLD: Despite having a considerable interest burden, Egypt’s refinancing risks are low given the market access and the external liquidity, with an attractive current yield that provides a cushion against price losses.

Climate-related extreme weather events in the region increased by 85% between 1980-2000 and 2001-20. 

Natural disasters cost an annual average of 2.13% of regional GDP from 1980 to 2020.

In 2024, the Inter-American Development Bank (IDB), through its “ONE Caribbean” program, approved a total of USD 790 mn for new projects across the region.

Our estimates suggest that, so far, these shocks have not had drastic impacts on the long-term growth potential of these countries.

While economic damage has been relatively limited so far, a continued rise in extreme natural disasters could overwhelm countries’ recovery capacity.

We maintain our HOLD recommendation for Barbados, as well as our SELL recommendation for Trinidad and Tobago. We upgrade The Bahamas from HOLD to BUY and Jamaica from SELL to HOLD.   

The Milei administration has performed remarkably well in addressing inflation thus far, bringing monthly inflation from 25.5% to 1.6%.

This reduction has also been undertaken while also adjusting key relative prices that were subsidized under the prior administration, which has been an additional challenge.

Since the announcement of the new exchange rate regime on April, the multilateral REER has been depreciating despite inflation stabilizing at lower levels.

BUY: Despite the recent underperformance, we are optimistic about the progress in the macroeconomic front and still see current valuations as an opportunity. 

The surge in international reserves was driven by IMF disbursements, strong remittance inflows, China’s loans rollovers, tight monetary policy, and FX controls.

Despite recent improvements, reserve adequacy remains below key thresholds, leaving Pakistan exposed to external shocks.

Sustaining reserve recovery hinges on continued IMF and bilateral support, along with fiscal and structural reforms.

Low FDI levels, limited market access, and geopolitical risks pose major challenges for the external sector.

BUY: In line with our expectations, Pakistan is managing to rollover its official debt without major inconveniences.

The Supreme Court gave the green light to the process to lift President Chaves' immunity, opening the way to a possible impeachment unprecedented in Costa Rica's history. 

He is accused of diverting funds from a development bank (CABEI), when he was Minister of Finance, to benefit his electoral campaign through undeclared consultancies. 

The decision is now in the hands of Congress, where a two-thirds majority (38 votes) is required to approve it. The ruling party only has 9 seats, leaving the outcome dependent on support from a fragmented opposition. 

Seven months before the elections, the country faces a dilemma: move towards impeachment or allow Chaves to finish his term under investigation. 

We expect a limited impact of politics on credit in the short term. With current yields around 7%, we maintain our HOLD rating on Costa Rica’s Eurobonds. 

In this report, we assess whether our current rating on COSTAR remains justified, based on its YTD performance relative to regional peers and benchmark indices, as well as the associated risk profile. 

Costa Rica’s Eurobonds have returned 4.2% YTD, underperforming regional peers like Guatemala (+5.8%), Honduras (+8.7%), El Salvador (+4.7%) and Mexico (+8.4%) as well as major benchmark indices. 

Spreads vs. the EM USD Sov Index sits 1 standard deviation above the mean while peers like Guatemala stay 2 std. dev. above and Honduras 1 std. dev. below the mean. 

We don’t see major risk associated with political events or US tariffs, while continue to see a solid macro framework, sustainable debt trajectory, and persistent IMF support. A credit upgrade remains a potential key positive catalyst. 

We favor the COSTAR 7.158% 2045 for its roll-down and current yields near 7%. With bonds at 104c and valuations fair, we upgrade to HOLD from SELL. 

On September 1^st, general elections for a new president and the 65 members of the Parliament will be held.

Although both candidates are aligned with left-wing parties, Norton's campaign promises include a significant increase in spending measures.

We expect a competitive election to be decided by a tight margin, but see lower risks of prolonged disputes (as in the 2020 elections) due to the electoral body's implementation of anti-fraud mechanisms and the anticipated enhancement of international observation.

We tend to believe that President Irfaan Ali will secure the reelection. Nonetheless, the race remains open, and a return of the PNRC cannot be ruled out.

The Zambian Kwacha has appreciated by 14.02% in the first half of 2025, being the second-best currency performer in Africa, just behind Ghana.

In the 1Q25, exports and imports grew by 20.0% YoY and 19.9% YoY, respectively, increasing the trade balance surplus by 21.03% YoY.

The financial account showed a USD 30.4 million surplus in 1Q25, compared to a USD 1,394.4 million deficit in 1Q24.

We have revised our estimate of the average exchange rate from 29.47 USD/ZMW to 26.18 USD/ZMW in 2025, reflecting our expectation of a lower current account surplus from 2.0% to 1.1% of GDP due to the exchange rate appreciation.

HOLD: ZAMBIN 33 is yielding well below its credit rating peers and offering its lowest Z-spread since issuance, but the 6.3% current yield and low external debt service burden provide some protection.

Ecuador saw a strong tax revenue performance in 2024, exceeding targets by USD 915 mn (0.7% of GDP) due to temporary measures like the VAT and ISD rate hikes, tax amnesties, and special contributions.

As temporary revenues fade, the administration has opted to rely on increasing audits, targeting capital outflows, and imposing an import tariff on digital services to sustain collection.

The government could either extend short-term fixes or move towards a comprehensive tax reform by late 2025, potentially including structural measures like reducing exemptions and introducing new targeted taxes.

Based on our assessment, we believe the administration will eventually pursue structural reforms to expand the permanent revenue base, with key proposals likely unveiled alongside the 2026 budget.

HOLD: Despite the increasing financial package from the IMF, we remain cautious given the uncertainty regarding Noboa’s tax reform and the future of the fiscal balance in the country.

The Executive proposes a 2026 budget with expenditures totaling GTQ 161.8 bn (15.8% of GDP), the highest in the country's history. 

The projected fiscal deficit amounts to 3.2% of GDP, extending the expansionary trend started with the 2025 budget. We maintain our projection of a fiscal deficit of 2.8% of GDP and a primary deficit of 1.0% for 2025. 

Despite large fiscal space, challenges persist in the low execution and transparency of public spending, especially in infrastructure. 

The sustainability of this strategy will depend on channeling resources towards activities that increase productive capacity and long-term growth potential.

The name remains one of the strongest relative value names in our coverage, with yields still above its credit tranche — we continue to see an appealing risk/reward and maintain our BUY. 

Our EMFI Core Index had a strong June, climbing 3.8% as nearly all its components advanced. Argentina was the sole exception, holding steady. 

The index concluded 1H25 with a strong 8.1% gain, marking its second-best first half on record, trailing only 2024's 12.6%. 

ECUA (+15.4%), LEBAN (+8.7%), and ANGOL (+6.1%) were June’s top performers, while ARGENT (+0.3%) was the weakest performer. 

During the month, we closely monitored the impact of the Israel-Iran conflict on global markets while covering 1Q and 1H results for several countries. 

During the month, we saw two issuances from the countries we cover: BARBAD 8% 2035 and BAHAMA 8.25% 2036. We made no changes to our credit strategy recommendations in June.  

The YoY inflation declined from 37.9% in April to 35.4% in May, although market participants expect the central bank to miss its target for the year.

GDP growth slowed from 5.4% YoY in 4Q24 to 2% YoY in 1Q25, driven by weaker domestic demand.

Profit margins fell to 4.6% in 1Q25, the lowest level since 4Q20, despite easing monetary policy since late 2024.

We revised our inflation forecast upward from 26.4% to 28.1% and our GDP growth forecast from 3.4% to 3.0% in 2025.

BUY: We like the credit due to healthy fundamentals and attractive valuations from a relative value perspective.

The arrest of Ekrem Imamoglu affected market confidence in the administration and put pressure on the currency, precipitating a sharp decline in FX reserves, but the crisis appears to be under control.

With geopolitical risks dissipating, the name enjoys healthy solvency and liquidity fundamentals.

On a relative value basis, we see the name as attractive and believe its spread can tighten. Good current income is also a positive factor.

We evaluate the risk/reward asymmetrically skewed to the upside and modify our recommendation from HOLD to BUY.

Despite progress under the IMF program, Sri Lanka’s fourth review remains pending due to unresolved structural benchmarks and financing assurances.

Although the external sector registered a current account surplus in early 2025, rising import levels coupled with volatile oil prices present increasing risks to the external sector.

The US tariffs, currently on hold, pose a significant risk to Sri Lankan exports, particularly in key sectors such as garments and textiles.

While remittances and tourism have shown strong performance, Sri Lanka remains highly exposed to external shocks, and any disruption could increase fiscal and monetary pressures.

HOLD: Strong macroeconomic momentum has pushed valuations to their highest levels since March, but external risks persist. 

The IMF approved the third review of the EFF and ECF programs with Honduras and authorized a new disbursement of USD 160 mn, highlighting the commitment to fiscal stability and partial progress in structural reforms. 

Almost all performance criteria were met as of March 2025, with ENEE cutting distribution losses to 34.7%, reinforcing fiscal and operational progress, though priority social spending remains lagging. 

Despite progress, challenges remain on the institutional agenda: only 3 out of 6 structural targets have been met, several reforms are still pending, and new benchmarks were added in a sensitive political context.

BUY: Strong macro and fiscal stability, supported by the IMF anchor, has helped to contain idiosyncratic risk. With yields surpassing those of regional peers, Honduras consolidates its position as an appealing risk-reward story. 

Progress on external buffers, ESG indicators (where Honduras ranks in the bottom global quintile), and remittances independency are needed to unlock further upside in yields. 

Despite ongoing vulnerability to oil price volatility (with average prices currently below budget projections), the government is implementing significant tax reforms to boost non-oil revenues.

President Bola Tinubu approved four key tax bills aimed at increasing tax collection through systemic efficiency.

We don’t expect this tax reform to generate substantial social discontent as it incorporates specific mitigating measures, but the new VAT distribution may pose political risk due to regional equity concerns.

The tax reform poses significant upside risks over the medium term, even if the government falls short of its 18% tax-to-GDP target by 2026, as the country will have a more efficient tax system and diversified revenues. 

In the first quarter of 2025, GDP rose by 3.5% YoY, despite a contraction of 4.3% in the oil sector.

Oil output continues on a declining path, hitting 1002 tbd in April (-6.7% YoY) and 1015.5 tbd in May (-10.2% YoY).

Domestic credit for the non-oil sector remains limited, particularly due to higher financing for the public sector.

The government is promoting new privatizations and tax reform to encourage economic diversification, although the oil sector's importance is unlikely to fade in the medium term.

HOLD: Improved oil prices would benefit the credit through the next year, but the high external debt burden can only be solved with sustained growth and overall surpluses.

We project Ukraine’s GDP growth at 2.6% in 2025, with downside risks if the war of attrition persists.

Inflation accelerated to 15.9% YoY in May 2025, while the NBU maintained its policy rate at 15.5%, and we maintain our inflation forecast of 10.6% by the end of 2025.

We forecast Ukraine’s fiscal deficit at 18.3% of GDP in 2025, with currently 57.8% of spending allocated to defense and revenues up 149.8% YoY.

International reserves stood at USD 44.5 bn in May 2025, covering 5.8 months of imports, supported by USD 4.6 bn in aid received between January and April.

With Eurobonds trading at deeply depressed levels, we see the risk-reward tilted to the upside. We maintain our BUY recommendation.  

Jamaica's current account surplus rose to 3.4% of GDP in 2024, an increase from 2.9% in 2023.

In 1Q25, stopover tourism arrivals fell 5.6% YoY, partly due to adverse travel advisories from the US. Total visitors came in at 1.2 mn, 94% of the Ministry of Tourism’s target of 1.3 mn.

Remittances during the first two months of the year were higher than last year (+3.9% YoY in January and +2.3% YoY in February), but they could be affected by Donald Trump's proposed 3.5% tax on remittances

For 2025, we project a moderate fiscal surplus of 0.5% of GDP, primarily driven by the new US trade and immigration policies, a slowdown in the tourism sector, and concerns over slowing economic growth in the US, which could affect remittance inflows.

Yields fail to compensate for the latent external risks embedded in the credit, particularly with hurricane season just underway. We reaffirm our SELL rating. 

El Salvador posted primary and overall surpluses in 1Q25 thanks to spending restraint and higher non-tax revenues.  

We revised our fiscal projections, forecasting a primary surplus of 3.4% of GDP and an overall fiscal deficit of 0.3% of GDP in 2025. 

Congress approved the long-awaited Fiscal Sustainability Law on June 10, fulfilling one of the IMF’s structural measures and setting legally binding debt targets for the Non-Financial Public Sector. 

El Salvador continues to meet most of its commitments under the IMF’s Extended Fund Facility (EFF), but the exclusion of pension liabilities from the central government balance remains a transparency concern.

HOLD: Despite progress in fiscal consolidation and compliance with EFF targets, the name has a high debt-to-GDP ratio and low growth, while trading with yields below credit rating peers.

The IMF increased its growth forecast from 3.6% to 3.8% for the current fiscal year that ends on June 30 after a surprise of 4.3% in the last quarter of 2024.

Private investment rose from 39.5% to 63.5% of the total investment in the first quarter of FY 2024–25, reaching its highest level in at least 5 years.

Real credit to the private sector rose by an average of 8.8% during the first quarter of 2025.

The government announced the sale of stakes in 10 public companies for FY 2025-26, but the military sector is deepening its control over the food sector.

HOLD: While liquidity fundamentals remain worrying, the name still enjoys access to external markets for rollover purposes and high coupons partially mitigating potential price declines.

Following the IMF’s May visit, Pakistan’s authorities committed to energy, monetary, and fiscal reforms under the EFF and RSF programs, presenting the FY 2025-26 budget around those programs’ objectives.

In the first three quarters, revenues surged by 36.7% YoY, yet interest payments consumed nearly 48.2% of revenues.

Pakistan’s Finance Ministry projects the fiscal year 2024-25 to close with a deficit of about 5.6% of GDP and a primary surplus of 2.2%.

The new budget considers revenue‑enhancing measures, targeting a primary surplus of 2.4% of GDP and an overall deficit of 3.9%.

We forecast the deficit to narrow to 4.6 % of GDP in FY 2025‑26 and 3.6 % in FY 2026‑27, but slower growth, inflation spikes, and potential defense-spending shocks could derail consolidation, especially given volatile non‑tax revenues from state‑owned enterprises.

BUY: The increase in revenues is encouraging, as it reduces liquidity pressures. With official creditors mostly assured to cover the financing gap, bonds look attractive in our opinion.

Greater sectarian polarization and low voter turnout consolidated the presence of traditional parties and marginalized civil society forces.

While municipal elections do not represent a proper test for political parties, they confirmed that Hezbollah is far from disappearing in the Lebanese political landscape.

Hezbollah and the Amal Movement succeeded in unifying the Shia vote, avoiding a defeat in what was expected to be a plebiscite and maintaining their territorial base in southern Lebanon despite Israel's attacks.

On the side of catholic parties, Lebanese Forces took away seats from the Free Patriotic Movement, likely related to FPM’s relationship with Hezbollah and Michael Aoun’s legacy.

BUY: Despite the rally in the last months, the PDI-adjusted price is low, at 12.7c, which tilts the risk/reward balance to the upside.

The FY2024/25 budget projected growth in revenues and expenditures of 6.7% and 4.7%, respectively, with an estimated primary surplus of 3.9% of GDP and an overall deficit of 0.5% of GDP.

The cumulative fiscal deficit for the first ten months stands at USD 38.3 mn (0.3% of our estimated GDP), with revenues amounting to USD 2.5 bn (15.6% of GDP and 69.4% of the annual target).

The FY2025/26 budget aims to consolidate the fiscal commitment and discipline that the government has sought to maintain, projecting for the first time a fiscal surplus of 0.5% of GDP and a primary surplus of 4.5% of GDP.

We forecast a primary surplus of 3.7% and an overall deficit of 0.7% for fiscal year 2024/25. For fiscal year 2025/26, we forecast a primary surplus of 4.5% and an overall surplus of 0.2%.

HOLD: Neutral credit indicators and a 7.4% current yield for the 8-year bond balance the risk/reward proposition. 

Inflation slowed down to 2.8% MoM in April and both the asset-based break-even inflation and the central bank’s market expectations survey signal further declines ahead. 

Milei gained political momentum with a key electoral victory in the City of Buenos Aires, which is set to influence alliances for the October mid-term legislative elections. 

Argentina's leading GDP indicator registered a 1.8% MoM seasonally-adjusted decline in March; however, we maintain our 2025 GDP growth forecast at 5.2%. 

The government issued a peso-denominated bond subscribed in USD to boost international reserves and secure funds to meet Eurobond maturities, but meeting IMF program targets will require additional policy and financing efforts. 

BUY: With the upcoming election as a likely catalyst for further spread tightening, we think that the name will provide strong returns and the government will be able to roll over its 2026 Eurobond maturities. 

Costa Rica requested a USD 1.5 bn Flexible Credit Line (FCL) from the IMF on a precautionary basis, following the successful completion of the previous Extended Fund Facility (EFF). 

The IMF praised the country's macroeconomic stability, highlighting 4.3% growth in 2024, low inflation, and prudent fiscal management, although it warned of the need to make progress on pending structural reforms. 

Costa Rica’s fiscal position strengthened in January–April 2025, with revenues up 2.5% YoY and expenditures down 1.7% YoY, driven by improved tax collection and a 5.7% drop in interest payments. 

The political landscape adds uncertainty with a president who could lose his immunity, a ruling party without a clear successor, and speculation about Chaves possibly tendering an early resignation to seek a seat in 2026. 

SELL: While fundamentals seem strong, Z-spreads are as low as 170 bps, which seems expensive in relative value terms. 

Our EMFI Core Index gained 2.4% in May, with 20 names rising, 2 holding steady, and only 1 losing ground. 

GHANA (+7.1%), VENZ (+7.0%), and PKSTAN (+5.3%) were May’s top performers, while only UKRAIN (-3.9%) lost ground.  

During the month, we closely evaluated the impact of sanctions on the Venezuelan oil industry and its exports in light of the recent developments.  

We also revised the outlook for our African Countries with fresh macroeconomic data from the latest WEO and our own updated projections, upgrading our recommendation on GHANA to BUY based on relative value considerations. 

We continued to monitor the ceasefire agreement in Pakistan. After geopolitical risks for the credit dissipated, we upgraded the name to HOLD. 

We are closely tracking Ecuador’s fiscal outlook, and given our bearish expectations on the fiscal front we downgraded the credit from BUY to HOLD. 

Arrests of CHP members and other government opponents continue, while the lira has already overcome the USD/TRY 39 threshold, increasing inflationary pressures.

Authorities remain focused on bringing inflation to single digits, with the Monetary Policy Committee (MPC) restarting the tightening cycle with a 350 bps rise and stressing the importance of fiscal prudence.

During the first four months of 2025, once adjusted by inflation, fiscal accounts showed a 7.9% improvement in revenues and a 4% decrease in expenditures compared to the same period in 2024.

Even so, lower-than-expected revenues led us to adjust our estimations for the fiscal deficit, from 3.5% of the GDP to 4.0%, still representing an improvement compared to the 4.9% 2024 budget deficit.

The country still has considerable external liquidity and is also able to tap international markets, but we believe that spreads are already tight, especially in relation to credit peers. Therefore, we switch from BUY to HOLD.

President Noboa began his full term with strong legislative backing after his ADN party, in alliance with Pachakutik, PSC, and independents, secured control of key commissions in the National Assembly.

The administration's first urgent bill, the “National Solidarity Law,” includes fiscal incentives to support public security and recovery in violence-affected areas.

A second reform aims to modernize Ecuador’s procurement system, targeting corruption and waste equivalent to 0.7% of GDP, through international standards, digital oversight, and whistleblower protections.

Following the consolidation required under the IMF program, the administration has announced policies on strategic sectors including fuel subsidy cuts.

HOLD: Despite the finance minister's statements regarding the multilateral guarantee for future debt issuances, we continue to see a lack of progress in the fiscal arena.

Following the election, PM Kamla declared her intention to reduce the inherited fiscal deficit by cutting existing public spending.

There is an ongoing negotiation with the United States to ensure access and exploitation of natural gas in the Dragon and Manakin-Cocuina fields on the border with Venezuela.

The fiscal deficit in FY 2023/2024 amounted to TTD 9.1 billion (5.2% of GDP), far exceeding the initially budgeted TTD 5.2 billion (3% of GDP).

Everything indicates that a significant recovery in natural gas production will not occur in the short term, but medium-term prospects are better.

SELL: We believe the risk/reward profile is unfavorable and likely to deteriorate further in the short term given the weak fiscal position. 

Following our update to macro-fiscal forecasts and the release of the April IMF WEO update, we look at relative valuations by comparing CCC-rated countries plus Egypt and El Salvador.

We remain positive on Argentina given its strong economic policy, plus the multilateral support. We also turned positive on Pakistan after tensions with India dissipated.

Political risk reigns supreme in Bolivia, as presidential elections in 2025 will be critical for implementing much-needed reform.

Egypt and El Salvador, on the other hand, seem expensive relative to peers, but high coupons compensate for possible spread widening.

Investors are getting nervous about Noboa’s lack of progress in the fiscal sphere; if measures are not taken, we estimate an overall deficit of 2.4% of GDP.

Ukraine still has support from the IMF and the EU, mitigating downside risks. It has demonstrated a strong willingness to pay, and near-term Eurobond debt service is minimal.

 Three of the nine presidential candidates are aligned with the leftist movement that has governed the country for the past two decades. The other six candidates are from center-right opposition parties.

Andrónico, the most popular leftist candidate according to recent polls, can still register as a candidate if he receives the endorsement of another party before June 6.

If Andrónico's candidacy materializes, both the left and the right will be highly divided for the upcoming elections. Therefore, a runoff will likely determine the outcome of the presidential election.

Waves of protests are likely to break out if Andronico is left out of the election.

SELL: Fragile reserve strategy, political uncertainty, and stretched valuations undermine expected returns; risks to the FX peg and debt servicing capacity remain elevated ahead of August elections.  

In 2024, the fiscal deficit narrowed to 6.8% of GDP and 2.1% of GDP primary surplus, supported by IMF reforms.

Last year, tax revenues rose by USD 2.6 bn due to a VAT hike, the removal of exemptions, and broader tax base measures; further revenue-raising reforms continue in 2025 to support IMF targets.

The 2025 Budget introduces new tax measures, aiming to raise tax revenues to 13.9% of GDP, slightly above our forecast of 13.7% of GDP.

High interest payments constrain spending, but considering ongoing reform efforts, we estimate that the fiscal deficit will fall to 6.1% of GDP in 2025 and 5.5% of GDP in 2026, with 2.8% and 2.5% of GDP as primary surplus, respectively.

HOLD: External risks persist, but manageable debt service and fiscal consolidation support stability; domestic challenges remain, yet IMF support helps contain downside.  

Inflation fell to 16.5% YoY in March from 16.8% in February, driven by food and electricity generation, which has improved scarcity. 

So far, the central bank has been cautious regarding its monetary policy tightening, increasing 50 bps on November 12, 2024, and February 11, 2025, explained by their fears of further contributing to a contraction in the economy, paired with the drought effects. 

The kwacha posted a MoM 5.0% appreciation, trading at USD/ZMW 26.7 on May 8, but returned to the USD/ZMW 28 threshold in the last two weeks of May. 

Nonetheless, we are not expecting major volatility from the currency, considering that copper production has been on the rise and reserves remain strong. 

We maintain our estimation for inflation at 13.7% by the end of 2025, but there are significant downside risks. 

HOLD: ZAMBIN 33 continues to yield slightly below the CCC-rated average, and we believe it is warranted based on liquidity relief provided by the restructuring. 

With 96% of votes counted, the NDP secured 18 out of 51 seats, two more than in the past elections, while the VHP secured 17.

Voter turnout was 65.8%, well below the 2020 and 2015 elections, in which participation was 71% and 72.5%, respectively.

Although there is still high uncertainty about the Surinamese political outlook, it seems that odds have change in favor of the opposition candidate, Jennifer Geerling-Simons.

A government led by Simons would likely conduct to a deterioration of Suriname fiscal position in the coming years, nonetheless, the expected oil boom by 2028 would be enough to put the public finances back on track.

Guatemala’s economy grew 3.7% in 2024, up from 3.5% in 2023, driven by higher public spending and investment. 

However, the start of 2025 shows signs of deceleration, with an increase in the trade balance deficit. 

The IMF raised its growth projection for 2025 to 4.1% from 3.6%, while the Bank of Guatemala lowered it to 3.8% (from 4%) due to external risks; we maintain our forecast at 3.6%.  

Remittances rebounded strongly in the first quarter of 2025 (+20.5% YoY), boosting consumption and easing pressure on the external balance, but slowed down to 7.4% YoY in April. 

Guatemala’s removal from the IACHR human rights blacklist, along with other international law-facing reforms, are positive signals of renewed international engagement and efforts to strengthen legal certainty.

The name has been recently upgraded to "BB+" by S&P. To become a BBB-, we evaluate that greater progress is necessary in Governance. Given attractive current yields, and solid fundamentals, we maintain our BUY rating. 

Barbados’ real GDP grew by an estimated 2.6% YoY in Q1 2025, driven primarily by tourism (+9.5% YoY), construction (+6.4% YoY), and business services (+3.4% YoY).

The current account posted a moderate deficit equivalent to 0.36% of GDP, primarily due to a decline in net exports of goods. However, this was partially offset by an increase in net service exports, driven largely by growth in the tourism sector.

In FY 2024/2025, the government recorded a primary fiscal surplus of 4.6% of GDP (+1.1 p.p.), supported by corporate tax reform and stronger economic growth.

The risk of natural disasters cannot be ruled out in Caribbean countries, as demonstrated by the impact of Hurricane Beryl in July 2024.

Despite the improved economic outlook and stable solvency Indicators, we continue to recommend to HOLD the credit due to its inherent vulnerability to natural disasters. 

The US–Ukraine Minerals Agreement established a joint reconstruction fund funded by Ukraine’s mineral revenues, restoring US military aid but with strings attached.

Ukraine retains ownership of its natural resources under the deal, which excludes existing projects and hinges on attracting private capital for new ventures.

Despite the agreement, peace talks have stalled, with Russia demanding territorial concessions and continuing military operations amid coordinated Western pressure.

Without a significant shift in Russia’s strategic calculus or a consistent US diplomatic posture, the likelihood of a persistent ceasefire remains low in the near term.

Ukraine held unsuccessful negotiations with an ad hoc creditor committee representing the outstanding restructuring warrants worth USD 3.2 bn. 

Despite the uncertain trajectory of the conflict, current depressed bond prices limit downside risk. We maintain our BUY for the name. 

One of the two polls available places the ruling VHP party in third place with 7 seats and includes a large share of undecided voters, equivalent to 10 out of 51 seats.

The other poll shows the VHP leading with 17 seats but excludes undecided voters from its results.

Considering the polls’ results, we believe the final stance of the NPS will be crucial for the formation of a new government, though everything will depend on the final composition of the national assembly.

We see the election as highly competitive, but we are slightly more inclined to a VHP victory.

BUY: Despite weak performance in the last month, the GranMorgu oil project remains on track and we see good prospects for the credit.

SSA countries are showing moderate growth prospects, with Zambia and Ghana outperforming the regional average, while Nigeria and Angola lag slightly behind.

Nigeria stands out in terms of solvency, with lower debt ratios and stronger current account surpluses; Zambia remains the most challenged.

Angola faces elevated liquidity pressures, with high external debt service and interest-to-revenue ratios, particularly in the short term.

We upgrade Ghana to BUY on improved fundamentals, rating momentum, and attractive yields amid a stabilising global backdrop.

We maintain a HOLD on Nigeria, Angola, and Zambia due to persistent external vulnerabilities despite some supportive developments.

In April, Venezuelan oil production averaged 888 tbd (–2.5% MoM; +7.6% YoY) according to OPEC secondary sources, and 1,051 tbd (+0.3% MoM; +19.7% YoY) based on direct communication.

Exports dropped sharply: Reuters reported a 13.16% MoM decline, while Bloomberg reported a 40.62% MoM fall.

Venezuelan oil buyers have continued to bypass US sanctions through origin rebranding (labeling the crude as Malaysian) and more recently as Brazilian.

Brent fell by 5.01 USD (–7% MoM) to average 66.46 USD/bbl in April, pulling Merey down to 56.72 USD/bbl (–7.2% MoM).

We estimate relative risk measures, or betas, for the countries we cover. High-beta regions include Sub-Saharan Africa and East Asia, while Latin America and the Caribbean show mixed results. 

Argentina (2.14) and Zambia (1.80) display the highest betas, indicating greater sensitivity to global risk factors. In contrast, Trinidad & Tobago (0.41) and Jamaica (0.69) show the lowest betas, suggesting a less market-sensitive risk profile. 

In Nigeria, market risk explains 85% of the variation in weekly returns, highlighting a particularly strong correlation with broader market movements. 

Following Liberation Day, average spread changes were +29 bps for low-beta countries, compared to +212 bps for high-beta ones—underscoring the value of beta as a risk management tool in risk-off episodes. 

Following the May 12 de-escalation agreement between China and the U.S., risk sentiment improved notably. High-beta countries saw yields reductions by an average of 79 bps, while low-beta countries experienced only a 4 bps decline. 

Lebanon’s new government remains committed to achieving the pending conditions the IMF set back in April 2022 before granting a loan.

The Parliament passed a new banking secrecy law that finally complies with IMF standards, allowing access to bank records from the last decade.

Likewise, the Cabinet approved a bank restructuring draft law, intended to start conversations with the banking sector before moving on with the financial gap law that will identify losses and assign responsibilities.

The finance minister, Yasin Jaber, had an introductory meeting with debt holders in Washington on April 25, but there is still a long way to go before having a restructuring debt strategy.

All in all, we are inclined to agree with the authorities on their target to get a staff-level agreement for an IMF package this summer.

BUY: With PDI-adjusted prices as low as 12.8c on average, we still believe that the risk-reward of the investment remains attractive.

On April 22, a terrorist attack in Indian-administered Kashmir killed 26 civilians, reigniting geopolitical tensions and leading India to launch "Operation Sindoor" to target militant infrastructure in Pakistan.

The India-Pakistan conflict over Kashmir dates to 1947, with multiple wars and unresolved disputes. Tensions intensified in 2019 when India revoked the special autonomous status of Jammu and Kashmir.

In response to recent actions, India suspended a key water-sharing treaty, while Pakistan closed bilateral trade with India. These measures are fueling inflation and external liquidity risks in Pakistan.

After deadly cross-border clashes triggered by a terror attack in Kashmir, Trump brokered a surprise ceasefire between India and Pakistan.

After the ceasefire agreement, the likelihood of our no-escalation base case increases, pumping the bonds and balancing the credit risk-reward. We move back from SELL to HOLD.

The Honduran economy grew 3.6% in 2024, but high-frequency data for 2025 points to a slowdown, especially in the manufacturing sector, which is being affected by a decrease in exports to the United States. 

Remittances reached a record high in March, helping to narrow the current account deficit, although these flows are expected to moderate as deportations from the US stabilize. 

The IMF endorsed fiscal and structural progress following the third review of the program and a new disbursement of USD 155 million is expected in June. 

We project economic growth of 3.2% and inflation of 4.4% by 2025, with risks centered on the implementation of reforms during the election year. 

BUY: Attractive yields and robust fundamentals provide an attractive risk/reward proposition. 

The Jamaican economy grew by 1.4% YoY in Q4 2024, a return to growth after a 1.5% YoY contraction in Q3 2024.

The Ministry of Tourism reported that the industry generated approximately USD 4.3 bn in 2024 (+0.82% YoY) and attracted 4.2 million visitors (-0.6% YoY).

The US GDP contracted at an annualized rate of 0.3% in Q1 2025 according to preliminary data, down from the 3.1% and 2.4% growth rates recorded in the third and fourth quarters of 2024.

Since Jamaica’s economy is highly dependent on the US for remittances and tourism inflows, poor GDP performance in the US poses downside risks.