Diplomacy
Developing nations pivot from US dollar debt amid high interest rates
Emerging nations are shifting away from US dollar debt, turning to currencies with very low interest rates, such as the renminbi and the Swiss franc.
This shift, initiated by debtor nations such as Kenya, Sri Lanka, and Panama, reflects a reaction to the high interest rates set by the US Federal Reserve (Fed). These rates, in addition to angering President Donald Trump, have also increased the debt servicing costs for other countries.
Armando Armenta, vice president of global economic research at AllianceBernstein, told the Financial Times (FT), “High interest rates and a steep US Treasury yield curve… have made US dollar financing more burdensome for developing countries, despite the relatively low margins on emerging market debt. Consequently, these countries are seeking more cost-effective options.”
However, Armenta described the move to cheaper, non-dollar financing as “temporary measures” taken by countries that “must focus on reducing their financing needs.”
The switch to renminbi-denominated borrowing, with the Chinese currency reaching its highest level against the dollar this year, can also be seen as a consequence of Beijing’s $1.3 trillion Belt and Road development program.
Under this program, hundreds of billions of dollars in loans have been extended to foreign governments for infrastructure projects. Although the total figures for new renminbi loans are not widely known because Beijing negotiates them bilaterally with other governments, Kenya and Sri Lanka are seeking to convert high-profile dollar loans into this currency.
Kenya’s treasury announced in August that it was in talks with China ExIm Bank, the country’s largest creditor, to convert the repayment of dollar loans for a $5 billion railway project, which is straining its budget, into renminbi.
The president of Sri Lanka also told parliament last month that his government is seeking loans in renminbi to complete a major highway project that was halted when the country defaulted in 2022.
With the US federal funds rate between 4.25% and 4.5%—much higher than equivalent rates set by other major central banks—the total cost of new dollar-denominated borrowing is relatively high for many developing countries.
The Swiss National Bank lowered its interest rates to zero in June, while China’s benchmark seven-day reverse repo rate is 1.4%.
“The cost of financing appears to be the reason for the conversion to renminbi,” said Thilina Panduwawala, an economist at Colombo-based Frontier Research.
In the 2010s, many “Belt and Road” loans were issued in US dollars at a time when US interest rates were much lower. Since then, the cost of such debt for Kenya and Sri Lanka has increased significantly, accelerating the trend away from dollar financing.
By borrowing in currencies like the renminbi and the Swiss franc, countries can secure loans at much lower interest rates than those offered by dollar bonds.
However, Yufan Huang from the Johns Hopkins University China-Africa Research Initiative argued that Beijing’s broader efforts to promote lending in its currency have made limited progress.
“Although renminbi interest rates are lower, many borrowers are still hesitant. For now, it seems to be more of a case-by-case practice, as in the example of Kenya,” Huang said.
Since governments rarely earn export revenue in currencies like the renminbi and the Swiss franc, they may also need to hedge their exposure to foreign exchange rates through derivatives.
As the Panamanian government struggles to control its fiscal deficit and prevent its credit rating from falling to junk status, it took out nearly $2.4 billion in Swiss franc loans from banks in July alone.
Panama’s Finance Minister, Felipe Chapman, said that accessing cheaper financing saved over $200 million compared to issuing dollar-denominated debt and that the new loans were hedged.
The minister added that the country is “diversifying” its public debt management into both the euro and the Swiss franc, “instead of relying solely on American dollar capital markets.”
Colombia also appears to be turning to Swiss franc loans to refinance its dollar bonds. Last week, a group of global banks launched an offer to buy discounted Colombian bonds, which investors see as part of arranging a Swiss franc loan to the government that would use the existing debt as collateral.
Although Bogotá has not yet approved such a loan, the country’s finance ministry announced plans in June to diversify its foreign currency borrowing.
Andres Pardo, head of Latin America macro strategy at XP Investments, said that by borrowing at low Swiss interest rates of around 1.5%, Colombia could buy back dollar debt yielding 7% to 8% and local peso bonds yielding up to 12%.
The country’s local currency debt was downgraded to junk status by S&P that month after the government suspended a key fiscal rule.
Investors noted that while government borrowing in Swiss francs could help limit interest expenses, in the long run, such borrowing cannot replace access to the larger public market for dollar-denominated bonds.
“These help with fundamentals if you want to fix your maturity profile… but we need to see policymakers make improvements to reopen the [dollar] markets to them,” said one emerging market debt fund manager.
According to JPMorgan, companies in emerging markets are also selling more euro-denominated bonds this year, with the amount of this debt reaching a record $239 billion as of July.
The total value of dollar-denominated corporate bonds in emerging markets is approximately $2.5 trillion.
“This year’s euro-denominated issuances are growing more than dollar-denominated ones,” said Toke Hjortshøj, a portfolio manager at Impax Asset Management.
The manager added that issuers in Asia account for one-third of euro-denominated issuances, up from 10% to 15% fifteen years ago.
Diplomacy
CSTO strips Armenia of voting rights over two-year budget debt
Members of the Collective Security Treaty Organization (CSTO) have stripped Armenia of its voting rights and its ability to appoint representatives to official positions due to a two-year debt to the organization’s budget.
Kremlin Spokesman Dmitry Peskov said, “This decision was taken based on the organization’s charter due to Armenia’s failure to fulfil its obligations for several years.”
Prior to the CSTO leaders’ summit in Moscow, Peskov had stated that member states would “react” to the Caucasus country’s non-participation in the organization’s activities.
Ahead of the Moscow summit, Armenian Prime Minister Nikol Pashinyan said his country’s “interest has run out” regarding the CSTO. Through his press spokesperson, he announced that he would travel to Türkiye on 11 November to attend the United Nations Climate Change Conference (COP31) instead of going to Russia.
The CSTO leaders’ meeting was held with the participation of Russian President Vladimir Putin alongside the leaders of Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan.
The leaders jointly took the decision to revoke Armenia’s voting rights.
At the conclusion of the meeting, the participants also signed a joint declaration.
The declaration stated: “We confirm our unconditional commitment to the goals set out in the CSTO treaty and charter towards creating favourable and stable conditions for the comprehensive development of member states.”
Pashinyan had frozen Yerevan’s de facto participation in the CSTO in February 2024, citing the organization’s failure to aid the Armenian side during the armed clashes in Nagorno-Karabakh in September 2023.
Having referred to the CSTO as a “soap-bubble alliance” since that time, Pashinyan accused the organization’s members of “planning war” together with Baku. He stated that Armenia would not return to active work within the alliance at least “over the next five years”, adding that he would welcome it if the country were expelled from membership.
Relations between Armenia and Russia grew tense once again in the spring of 2026, after Yerevan moved closer to the European Union (EU) and the Kremlin responded with a trade war.
In May, Pashinyan refused to travel to Moscow to attend the Victory Day parade and declared that he did not support Russia on the Ukraine issue.
In response, Putin called on Yerevan to determine its foreign policy course through a referendum, advising Armenian authorities not to forget the fate of Ukraine.
Diplomacy
US urges Russia to draft proposals for new European security pact
The US administration has reportedly called on Russia to submit proposals for a prospective security treaty with Europe that would include measures to ease tensions between European nations and Moscow.
According to a report by news site Axios citing sources familiar with the matter, the US side conveyed the request during trilateral negotiations held in Abu Dhabi.
During the talks, US Special Envoy Steve Witkoff and Donald Trump’s son-in-law Jared Kushner suggested that the Russian delegation prepare a fresh proposal outlining its security concerns and demands.
The US delegation reportedly asked that this proposal clarify what kind of “symmetrical steps” Moscow is prepared to take to de-escalate tensions and “provide non-aggression guarantees to Europe”.
Another source familiar with the White House’s approach said the Trump administration aims to run the processes for a new European security architecture and a peace agreement between Russia and Ukraine simultaneously.
Under this plan, the actual implementation of the security understandings would take effect only after the signing of an accord ending the conflict in Ukraine.
Assessing the approach to the process, the source said: “[Ukrainian President Volodymyr] Zelenskyy will not agree to any compromise without knowing what will happen next regarding security guarantees. Putin also wants to see the exact same picture clearly. This is precisely why the security portfolio is so decisive.”
The same official noted that the US will not reach a security agreement with Russia without the support of Europe and Ukraine, adding that Washington will not grant Moscow veto power over European security decisions.
Vladimir Medinsky, aide to the Russian president and head of the delegation in the Ukraine negotiations, previously stated that the fundamental objective was building a comprehensive new security system in Europe.
Medinsky noted that the structure in question must take on the character of “a fair, new, modern Yalta and Potsdam that carries the spirit of Helsinki 1975 and responds to contemporary realities”.
The Russian official argued that if such a system were established, peace lasting for decades, or even centuries, could be secured in Europe.
Russian Foreign Minister Sergey Lavrov also announced that Moscow possesses its own position paper on how a new security architecture in Eurasia should take shape.
Lavrov stated that Russia hopes the Washington administration will “maintain its determination to pursue dialogue aimed at achieving an honest balance of interests where nobody’s security is impaired”.
Russian authorities have repeatedly stated that the country has no intention of attacking Europe.
Pointing out that they have no reason to fight NATO countries, Russian President Vladimir Putin previously said: “We have no interest whatsoever, neither geopolitical nor economic, political nor military.”
In a statement in October, Putin said Russia has no plans to attack anyone “in 2029, in 2030, or in the year 2050”.
On the other hand, Putin claimed that “all NATO countries are fighting Russia” and stated that the Russian military is currently the most combat-ready armed force in the world.
Following the contacts in Abu Dhabi, Kushner announced that he and Witkoff would travel to Moscow.
Explaining that they plan to meet Putin during the visit to discuss European participation in negotiations aimed at resolving the conflict, Kushner argued that the parties could make “far greater progress” if the Russian leader consents to such involvement.
Yury Ushakov, aide to the Russian president, stated that the US special envoys will arrive in Moscow on 12 November, with the planned meeting with the Russian president scheduled for the first half of the day.
Diplomacy
Vance leads indirect push for US-Iran ceasefire and nuclear talks
US Vice-President JD Vance has been personally involved over the past two weeks in indirect talks with Iran aimed at securing a fresh ceasefire and restarting nuclear negotiations.
According to Axios, Vance’s intense engagement indicates that he has taken it upon himself to extract the US from the conflict, which he views as responsible for the Republican Party’s shocking losses in this week’s elections.
This elevates the latest round of indirect talks to the highest echelons of the administration.
US officials and regional sources state that Trump is currently willing to let diplomatic efforts run their course to see whether any agreement is achievable.
Asked by reporters on Friday what his message was to Iran, Trump said, “We are talking to them.”
According to sources with direct knowledge of the matter, Vance speaks almost daily with Qatari Prime Minister Sheikh Mohammed bin Abdulrahman Al Thani, Pakistan’s Chief of Army Staff Field Marshal Asim Munir, and other mediators regarding the negotiations with Iran.
White House envoy Steve Witkoff and Jared Kushner, President Trump’s adviser and son-in-law, are also involved in the process.
Sources say Vance and the Qatari and Pakistani mediators have been discussing the possibility of holding a working-level technical meeting between the US and Iran in the coming days, though this has not yet materialized.
Before the war began in late February, Vance was among the most sceptical voices in Trump’s inner circle on the issue, advocating instead for a diplomatic solution.
In April, he led the US negotiating delegation at the Iran summit held in Islamabad and was personally involved in the talks that yielded a memorandum of understanding (MOU) signed between the US and Iran in June.
Vance subsequently headed the US delegation during a series of direct talks with Iran in Switzerland.
Two weeks ago, Vance sent a letter to Mohsen Rezaei, Secretary of Iran’s Supreme National Security Council, proposing that direct negotiations resume.
Rezaei is one of the closest advisers to Iran’s Supreme Leader, Mojtaba Khamenei.
Iranian officials noted that Vance’s letter generated positive momentum toward restarting talks.
On Wednesday, Vance said the war was the primary reason for the Republicans’ repudiation at the polls.
Sources involved in mediation efforts report that while progress is being made, the process is moving very slowly.
On Friday evening, the prime minister of Qatar said, “Over the past few weeks, we worked with our colleagues in the US administration who have a sincere intention to contain the situation and de-escalate. Thanks to them and the voices of reason in Tehran, we prevented the situation from spinning out of control.”
The prime minister added that discussions with the Trump administration continued following the midterm elections, though they were not as active as in previous days “because there are other matters.”
Nevertheless, he noted that the US intention to find a diplomatic resolution “remains ongoing” and emphasized that an agreement is possible.
On Friday morning, Trump and the Emir of Qatar discussed Qatari efforts to bridge differences between the US and Iran as part of an accord.
According to a statement from his office, Sheikh Tamim emphasized the necessity of “pursuing dialogue and diplomatic channels to resolve differences, prevent the region from facing further escalation, and ensure freedom of maritime navigation as well as the security of energy supplies.”
Separately, Trump confirmed on Friday that the US military conducted a strike on an anti-aircraft missile launcher on Qeshm Island in the Strait of Hormuz after it fired a missile at a US fighter jet.
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