Government debt rises to N$164 billion …as debt as a percentage to GDP increase faster than South Africa and Botswana

07 May 2018 15:20pm

Contrary to finance minister Calle Schlettwein that government is committed o reducing the debt levels to manageable levels, debt has in fact gone up.

Latest data from Simonis Storm Securities shows that government’s total borrowings have gone up from N$165.1billion reported in the prior month to N$164.5 billion.

Says analyst at the firm, Meameno Johannes, “This shows a year-on-year increase of 7.4% and a m-o- m increase of 0.3%. On another note, inflation remained unchanged in March 2018 at 3.5% as that of the preceding month. This is attributed to less spending as economic activity remains sluggish.”

Analysts Roland Brown and Cheryl Emvula have also forecast the debt stock to continue to rise totaling just under N$100 billion by 2020/21 due to forecast larger budget shortages.

“This represents a close to N$85 billion increase in the public debt stock over a 10-year period, or growth of 617%” they said.

They however observe that the trajectory of debt stock going forward is somewhat more positive and is likely to expand by little more than nominal economic growth over the nest three years.

“As a result, the debt-to-GDP ratio is starting to stabilise at approximately 45% of GDP. This is a marginal increase from the level forecasted by the ministry of finance for 2017/18 of 43.3%,” they added.  

Simonis Storm Securities has said total debt as a percentage of GDP has been moving in an upward trend albeit at a slow pace.

The firm further observes that the increase in total debt as a percentage of GDP is attributed to the increase in government debt that has been growing faster than Private Sector Credit Extension (PSCE).

How does Namibia’s debt compare to that of its peers?

“Namibia’s government debt as a percentage of GDP is increasing faster compared to its neighbouring countries South Africa and Botswana which remains worrisome. With government debt as a percentage of GDP higher than the long-term average for the past three years, it is likely that this trend will continue in 2018 as government continues to borrow more and economic growth remains slow,” observes the firm.

Government debt has been unsustainable and Brown and Emvula have observed that “Sources of funding for the deficit have hit a point whereby large deficits will only be able to be funded by unsustainable means going forward.”

On his part, trade minister, Tjekero Tweya informed the media recently that Namibia could consider borrowing from China to fund her industrial parks.

Refurbishments for the Hosea Kutako International Airport have been on record said to be carried out by borrowings from China. 

Meanwhile, Simonis Storm said Namibia’s annual growth in money supply (M2) rose at the end of March 2018, showing a year-on-year growth of 7.1 %, which is 0.6 % higher than the prior month.  

Private Sector Credit Extension (PSCE)also remained in line with February at N$91.1bn at the end of March 2018, the firm says.

“The slow growth in PSCE was brought about by the negative growth from instalment credit and other loans that contracted by 0.8% and 1.3% m-o-m, respectively. However, on a year-on-year basis PSCE has increased by 5.7% with instalment credit contracting by 4.3%. The contraction in credit instalment could be attributed to the decrease in vehicle sales,” says Johannes.

He added that PSCE as a percentage of GDP remained sluggish over the past 11 years averaging 48.3%.