Government debt expected to pass 50%

Government debt expected to pass 50%Very careful management needed Government has been urged to be prudent and conservative with the uptake of new debt. The government's uptake of debt is not expected to slow anytime soon, with stockbrokers Simonis Storm predicting that total government debt as a percentage of Gross Domestic Product (GDP) will exceed 50% by the year 2021.

It warns that Namibia's debt uptake also potentially means that it may have to approach the International Monetary Fund for a rescue package if it does not manage its precarious debt situation.

“We expect public-sector debt to increase to N$107 billion and debt to GDP to 51.9% by the end of 2020/21. This is above the estimated peak of 48.7% in 2020/21 [as] indicated in the Medium Term Expenditure Framework (MTEF),” says Simonis Storm.

“Escalating debt levels for a small open economy with little revenue generation capacity is a recipe for disaster.”

It warns that Namibia faces the possibility of having its debt stock rated at junk level.

The Bank of Namibia this week forecast a 0.2 decline in economic growth for the 2018/19 financial year, indicating low productivity.

“If the high debt level is not addressed, the 10- to 15-year permutations could be IMF or China bailout or even being forced to delink from the peg with the South African rand,” Simonis Storm says.

PSG Konsult says the government's external debt is expected to surge again in 2019 due to further currency depreciation and another disbursement of the African Development Bank loan agreement.

The ministry of finance recently said that Namibia would not tap the Eurobond market again soon and would rather opt to issue rand-denominated bonds or bid for more concessionary loans such as the recent AfDB loans.

OGONE TLHAGE