Africa-Press – Namibia. THE Bank of Namibia, despite reaching its monthly borrowing quota last week, has again put out a call to market, seeking to borrow N$215 million for the state.
The call made this week will see the central bank running the 14 active bonds – 10 fixed rate normal bonds and four inflation-linked bonds, which are expected to return N$175 million and N$40 million respectively.
Just last week, the central bank swept the market clean of N$415 million, instead of the N$215 million it had indicated it wants to borrow, and cited that it reserves the right to borrow as much as it wanted.
According to the national borrowing plan, for August, the central bank is only supposed to borrow N$315 million.
Answering to the state’s borrowing spree yesterday, deputy governor Ebson Uanguta said it was true that there was much being borrowed at a faster rate.
This over borrowing has, in a way, torn apart the borrowing plan of the state as published, and it is not clear for how long this would continue.
Asked whether this excess borrowing was not going to crowd out private sector investments, Uanguta said at the moment there is no indication that it will be the case.
The central bank had in the past not answered questions on why there were over allotments and how often this happens but rather stated that it had the right to allot as it feels right according to market needs.
Uanguta said the market liquidity indicates that sufficient cash is available for both the state and the private sector.
The borrowing through bonds, despite the available liquidity, mainly locks much cash that could be used elsewhere in the economy.
An analysis of bond allotments indicate that much of the funds are locked up in bonds that will mature after 2030 and might lead to a liquidity crunch if such continue, analysts have warned.
Trading in government bonds has in part been the income pot of many non-bank financial institutions over the years, but of late, private individuals also have a desire to earn the non-taxed coupons.
Pension funds and insurance companies have been the most active in taking up government debt and with the government mostly funding the non-productive sector, there is no possibility of reasonable investments to allow for the growth other than continuous borrowing.
The auction of the N$215 million will run next week Tuesday, 23 August 2022, and on auction are the – GC26, GC28, GC32, GC35, GC37, GC40, GC43, GC45, GC48 and GC50.
Of the above, the GC32, which is paying a 9% coupon, has been the most subscribed.
Inflation bonds GI27, GI29, GI33 and the GI36 are all on auction, seeking to raise N$10 million each.
To participate in government bonds, an investor needs a minimum of N$50 000 and can submit their bid to the Bank of Namibia.
For More News And Analysis About Namibia Follow Africa-Press
