INVESTIR (MAY 2026): Monthly Insights from the ICRG

AMERICAS:

Guyana – The government is shifting to strictly enforced FIDIC-based agreements. While this modernizes the system, it also means the state is actively reviewing existing procurement practices to align with global models. Courts are strong in upholding commercial deals.

Trinidad and Tobago – Trinidad is experiencing an ongoing FX shortage, placing serious pressure on firms’ ability to import raw materials. Official reserves cover about 6.4 months of imports. The Heritage and Stabilization Fund (HSF) holds US$6.38 billion, but the central bank is rationing supply to the market.

WESTERN EUROPE:

Hungary – The Tisza Party needs EU funds to stabilize the economy, but the EU’s “Conditionality Regulation” requires verifiable institutional change. Impediments to reform include a presidential veto, a recalcitrant Constitutional Court, and the Sovereignty Protection Office. The new government has signaled it will review state-funded contracts awarded to “oligarchs.”

Ireland – The governing coalition weakens with resignations, leaving the government with a working majority of five seats. While a no-confidence motion was defeated, the government may be forced to ‘pause’ green reforms or introduce more aggressive subsidies for fuel and agriculture.

EASTERN EUROPE: 

Albania – Massive, sometimes violent rallies are complicating Albania’s goal of completing EU accession by 2027/2030. However, the aggressive vetting process for EU entry has created a shortage of judges, leading to long backlogs in commercial courts.

Norway – The Resource Rent Tax expands the government’s tax reach beyond the oil and gas sector. The The Wealth Tax is creating a ‘brain drain’ with departees moving to Switzerland. The hydro grid is becoming increasingly congested.

AFRICA

Angola – The ‘Iran war’ premium has created a massive fiscal surplus, allowing the government to reduce public debt and stabilize the kwanza. Oil production is set to increase this year by 6.5%. Lobito Corrido is becoming a critical strategic asset, providing an Atlantic-facing export route for copper/cobalt from the DRC/Zambia.

Mali – The risk of a new coup d’état is very high; the junta abolishes political parties and extends Assimi Goïta a five-year renewable term without an election. The New Mining Code (2025) allows the government greater equity involvement and wider local content rules. Auydi-led seizures are now common; new deals are now negotiated vis-à-vis the Presidential Palace (as opposed to at the department level).

ASIA:

Pakistan – Total FX about $21bn (2-3 months of cover); most of the reserves are comprised of borrowed deposits (versus earned export revenue). Aggregate FX liabilities are significant: $27.5bn in principal due in ‘26’ additional $3.31bn in interest; over $14.4bn due within the next three months. Rollovers from ‘friendly countries’ are likely, but USD scarcity underscores repatriation risk.

Sri Lanka – Solid recovery in FX reserves (3.2-4 months of cover), driven increasingly by organic inflows (record remittances and tourism).  Foreign exchange servicing capped (via IMF agreement) at 4.5% of GDP annually until 2032. Large commercial repayments have been pushed back to 2028.

MIDDLE EAST

Saudi Arabia – New laws permit 100% foreign-owned firms to own land/real estate for the first time. Thirty-year tax holiday for companies moving to Riyadh. Five new rail-based logistic corridors launched, connecting Persian Gulf to the Red Sea, bypassing the Strait of Hormuz.

Turkey – Boundary between private property and the state increasingly blurred via the government’s ‘institutional consolidation’ of confiscated assets through the Turkish Wealth Fund. The decree has moved over $12bn of assets taken from firms accused of ‘anti-state’ activities.

Best political risk (Month-on-Month, 2026)

Hungary (3.0)

Jordan (1.5)

Lithuania (1.5)

Worst political risk (Month-on-Month 2026)

Mali (-3.0)

PNG (-2.0)

Ireland (-2.0)

Best composite risk (Year-on-Year, May 2026)

Ghana (5.0)

Zimbabwe (4.5)

Sri Lanka (3.8)

Worst composite risk (Year-on-Year, May 2026)

Iran (-16.5)

Qatar (-12.0)

Botswana (-5.5)

RISK DATA POSITIONS

Bullish

Upstream Oil/Gas (Guyana/US Permian)

Gold

US Treasuries (short duration)

Swiss bonds

Brazil bonds (NTN-F)

Mexico bonds (Mbonos)

India (G-Secs)

CHF

AUD

MXN/EUR

Bearish

Nickel

TRY

Italy (BTP)

WHAT’S NEW?

As our clients know, the primary function of the PRS Risk Governance Board (RGB) is the continuous monitoring of countries experiencing significant volatility in levels of political, economic, and financial risk. While this oversight is the foundation of our firm’s work, these deliberations also serve as the primary input for the PRS Proprietary Trading Desk. The positions we currently hold are a direct reflection of how our risk methodology is interpreting the current geopolitical environment and its impact on global markets.

In the sovereign debt markets, our governance framework has identified a significant divergence between energy-independent nations and those with high import dependencies. We are currently focusing on Mexican Mbonos and Brazilian NTN-Fs because their risk metrics are supported by strong domestic fundamentals. Mexico is seeing a structural improvement in its trade profile due to increased manufacturing integration with North America, while Brazil’s high real interest rates and status as a net commodity exporter provide a significant buffer against global volatility. Conversely, we are avoiding Japanese JGBs and Italian BTPs. Japan’s reliance on energy imports makes it vulnerable to price shocks, and the potential for a shift in its monetary policy creates substantial price risk. Similarly, Italy’s high debt levels make it particularly sensitive to financial instability within the Eurozone.

This same logic extends to our currency strategy, where we are pairing high-yield opportunities with safety assets. We maintain a long position in the USD against the JPY, as the US’ energy independence and reserve status offer a counterweight to Japan’s rising import costs. We are also utilizing the MXP against the JPY to capture the substantial interest rate differential, backed by Mexico’s stable trade outlook. For a pure risk hedge, we continue to utilize the CHY, which remains the primary destination for capital when our metrics indicate rising external conflict risks.

Regarding commodities, our methodology shows a clear separation between assets driven by geopolitical tension and those linked to industrial cycles. We remain positioned in Gold and North American upstream energy as hedges against systemic financial risk and supply chain disruptions in the Middle East. Meanwhile, our indicators for industrial growth suggest potential further downside for Iron Ore, Nickel, and Lithium. These commodities are facing a combination of cooling demand in China and a cyclical oversupply that we expect will keep prices suppressed for the foreseeable future.

We are also watching the increasing threats to maritime chokepoints, specifically the Strait of Hormuz and the Bab el-Mandeb, and how these disruptions are being integrated into our proprietary risk ratings.

The RGB has identified a significant shift in the risk profile of the global food supply chain. While market attention often focuses on energy, these transit corridors are equally critical for the movement of agricultural commodities and fertilizers. Our internal methodology now reflects an increased risk of price volatility driven not by crop failures, but by “transit friction.” When the passage through these straits is compromised, it necessitates longer, more expensive shipping routes, which directly impacts the landed cost of staples and agricultural inputs. This is creating a tiered risk environment where nations with high food-import requirements and low fiscal reserves are seeing their sovereign risk ratings deteriorate rapidly.

The PRS prop trading desk is responding to these governance insights by adjusting our positioning in the agricultural and currency sectors. We are currently observing that major exporters with secure, non-congested trade routes—specifically Brazil and the United States—are seeing their economic resilience scores improve relative to importers in the Middle East and North Africa. In our currency assessments, we are accounting for the inflationary pressure that high food import costs place on emerging market central banks. This often forces those nations into defensive interest rate hikes to protect their currencies, which informed our decision to favor the debt of countries that are self-sufficient in food and energy production.

Furthermore, we are monitoring how fertilizer supply chains are being weaponized or restricted by regional conflicts. Because agricultural productivity is so dependent on these inputs, any prolonged disruption to their transit becomes a structural economic risk. Our proprietary desk views this not just as a temporary spike in commodity prices, but as a fundamental shift in the “Security Premium” that must be applied to global equities and sovereign notes.

These deliberations regarding food security and maritime chokepoints are now a central component of our risk governance framework. By identifying these vulnerabilities before they manifest as broad market shocks, we are able to refine our positioning in a way that prioritizes stability. I look forward to discussing the specifics of these ratings and how they influence our medium-term outlook.

**

Clients should note that our popular Researchers’ Dataset (RDS) series – containing updates from 2025 – is available along with a range of related data series.  The RDS series – derived from our ICRG data – continues to yield unique insights in a range of topics that explore the impact of political risk on conflict and economic growth, inflation and monetary policy, youth unemployment and political stability, and much more.  Contact us at custserv@prsgroup.comto inquire about acquisition of the RDS updates.

April was a very impressive month for new and returning clients, ranging from some of the world’s top universities to the largest institutional investors throughout the US, Europe, the UK, and the Middle East and Asia.   Our data have become increasingly popular with the data demands of sovereign wealth funds, helping them and their clients in assessing geopolitical risk over time and across 141 countries, and in relation to issue-specific concerns, such as supply chain security.

ACADEMIC HAPPENINGS

As always, ICRG and related PRS data continue to be the gold standard of all geopolitical risk data among the scholarly and research communities.  For example, using ICRG’s corruption index as its primary institutional risk measure across 43 low-income countries from 1990 to 2019, this study finds that ICRG-recorded corruption carries materially different distributional consequences depending on institutional development context. In low-income settings where ICRG scores reflect weak institutional capacity, higher corruption and larger informal sectors collectively compress inequality by sustaining income opportunities for groups excluded from formal labour markets. In higher-income countries, the same ICRG-measured variables widen inequality by concentrating gains among upper-income cohorts. The moderating effect strengthens at higher inequality quantiles, confirming that ICRG’s institutional risk ratings carry the greatest analytical weight precisely where income disparities are most acute.

(https://onlinelibrary.wiley.com/doi/full/10.1111/ssqu.70100)

DID YOU KNOW?

Using our ICRG data, robust drivers of inequality across all specifications include financial development, unemployment, the age dependency ratio, population growth, and the capital stock-to-GDP ratio.

(https://onlinelibrary.wiley.com/doi/10.1111/kykl.12415)