Africa-Press – Namibia. THE Bank of Namibia last Friday said the country will borrow another N$900 million for use at the end of the year, adjusting the nation’s borrowing plan further upward.
This will bring the country’s total borrowing requirement to N$19,4 billion, and comes at a time when the country was just recently slapped with a credit downgrade from Moody’s Investor Service.
According to the central bank, the N$900 million to be borrowed at the end of the year will be “to cater for the extra budgetary cash requirement at the end of the fiscal year”.
This amount will be borrowed mainly by the issuance of treasury bills, said the central bank.
Commercial banks are mainly the ones that take up much of the treasury bills, and with private sector credit extension still limping, it is expected that further funds will flow to treasury from the commercial banks.
At the end of March this year, credit extended to the private sector grew only by 2,1% year on year compared to 2,8% in February, and it’s still moving below its six-month moving average of 2,3%, according to an analysis by Simonis Storm Securities.
The central bank borrows on behalf of the government.
At the release of the country’s borrowing strategy early last month, it was indicated that the 2022/23 borrowing requirement of N$18,5 billion will push national debt to N$140 billion.
The interest on these loans would be a whopping N$92 billion – the second-most expensive allocation for the fiscal year.
In what appears to be an affordability turn, the central bank also announced that it was reallocating part of the money which was supposed to be borrowed from international markets, to be sourced in the country.
“N$1,5 billion, which was initially envisaged to be raised from external sources, has been re-allocated to fixed-rate bonds (primarily during coupon payment months),” said the central bank.
The state already had plans to borrow N$10,2 billion from the country, and the new revision will have the local industry coughing up 60% of the country’s N$19,4 borrowing requirement.
Long-term investors such as pension funds and insurance companies are expected to come to the treasury’s aid.
Local economist Salomo Hei said the decision to borrow in the country was reflective of the rating, but asked whether there was actual “capacity for the borrowing” in the country.
Last month when Moody’s downgraded the country – the key concern was that Namibia was borrowing more than it could chew.
The rating agency had warned that this kind of borrowing could also spell a domestic liquidity crunch.
“Large gross borrowing requirements at 20 to 30% of gross national product and weakening debt affordability expose the credit profile to tightening domestic and external liquidity conditions to stem rising global inflation,” Moody’s had said.
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