Fiscal consolidation paramount – PSG Just like ratings agencies Moody''s and Fitch, PSG Konsult has also suggested that the government should continue on its path of fiscal consolidation.Releasing its opinion following Moody''s report released early this month, PSG said: “There is now a risk that Namibia''s sovereign credit rating will be downgraded to non-investment grade over the next 12 - 18 months, given that both the major rating agencies that rate the country have changed their outlooks to negative.
“Should a downgrade occur, it will increase the country''s borrowing costs and affect investment sentiment, which could feed through to slower economic growth. In order to prevent a downgrade, it is paramount that the government implements its stated fiscal consolidation path to contain public debt and that the economy does not experience any large shocks to economic growth or borrowing costs, which would complicate government''s fiscal consolidation efforts.”
Moody''s decision to revise Namibia''s outlook from stable to negative, while affirming the country''s investment grade credit rating, mirrors the decision by fellow rating agency Fitch in September.
“There is now a risk that Namibia''s sovereign credit rating will be downgraded to noninvestment grade over the next 12 - 18 months, given that both the major rating agencies that rate the country have changed their outlooks to negative,” said PSG.
“While we currently still rate Namibia''s sovereign credit at BBB- stable, our own sovereign risk score for Namibia deteriorated during our previous assessment in September. Our updated credit rating review will be published later this month,” PSG said.
Finance minister Calle Schlettwein still found it necessary to explain why government was on a path of fiscal consolidation.
He said: “Domestically, we are faced with liquidity constraints to finance the elevated financing needs as a result of these shocks on public finance. As a result of these adverse developments, it was necessary and timely that we respond to these shocks in a timely manner with appropriate magnitude.”
According to Schlettwein, this has resulted in reducing expenditure by 2.8% of gross domestic product or some N$4.5 billion.
“Operational budget activities for the remainder of the year have to be aligned to the new norm and development budget projects not started, are deferred and those that have recently started, are slowed down,” Schlettwein said.
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