{"id":16590,"date":"2022-04-09T16:59:24","date_gmt":"2022-04-09T16:59:24","guid":{"rendered":"https:\/\/www.africa-press.net\/namibia\/all-news\/namibias-rating-downgrade-the-impact-on-a-country-and-its-people"},"modified":"2022-04-09T16:59:24","modified_gmt":"2022-04-09T16:59:24","slug":"namibias-rating-downgrade-the-impact-on-a-country-and-its-people","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/namibia\/all-news\/namibias-rating-downgrade-the-impact-on-a-country-and-its-people","title":{"rendered":"Namibia\u2019s Rating Downgrade: The impact on a country and its people"},"content":{"rendered":"

Africa-Press – Namibia. <\/strong><\/span>by Josef Kefas Sheehama<\/b><\/p>\n

Namibia\u2019s Rating Downgrade:<\/b><\/p>\n

Moody\u2019s \u00adupgrades Namibia\u2019s \u00adoutlook to stable from negative to stable while long-term issuer and senior unsecured ratings to B1 from Ba3. Government is not a person, but rather it is an instrument given to a body of people to uphold the institutions to govern society. We should take a stand for the betterment of Namibia.<\/p>\n

A successful economic policy requires that priority be given to interventions that offer the greatest impact at the least cost. The current situation is dire. However, there are simple things that can be done that can have a meaningful impact in a relatively short period of time. Rapid action to promote these opportunities is the best way to get the economy going again. Given Namibia\u2019s shortage of domestic savings, stimulating economic growth requires foreign investment. The president\u2019s program to attract foreign investment recognizes this reality. This will succeed only if the policy is rationally formulated so that investors have confidence in the long-term sustainability of Namibia as an investment destination. His Excellency Dr. Hage G Geingob, Distinguished Delegates, actively participated in the Namibia Investment Summit held in Dubai on 23rd March 2022. I am especially pleased with the high level of engagement by the wide cross-section of stakeholders. I believe that together we are making measured progress towards the V2030. His Excellency, you have demonstrated sure, sound economic management and fiscal discipline, and a commitment to Namibia\u2019s economic recovery.<\/p>\n

Hopefully, the new plan will stimulate the action required to set us back on a growth path. The most important cause of Namibia\u2019s present economic woes is a shortage of technical and managerial skills. This is most clearly seen in government but is a problem throughout the economy. With a new rating from Moody\u2019s Investors Service, the Namibians expect to make the last step. An investment rating is expected to allow the country to attract more job-generating foreign direct investments. The economy of a country is always linked to the world economy through external economic activities such as foreign investment and foreign trade. In an effort to attract FDI and spur economic growth, Namibia has established the Namibia Investment Promotion and Development Board and has introduced policies that include fiscal and financial incentives. As with most economic events, it\u2019s difficult to predict precisely what the impact will be. In essence, a downgrade is just an assessment of our creditworthiness. However, the tag to B1 from Ba3 that has now been hung around our country\u2019s neck is still detrimental and it will impact how we are seen by foreign investors and how strong our bargaining power is on the global stage. A downgrade means that when Namibia needs to borrow more money, as it inevitably will, investors in the new bonds will demand a higher interest rate because of the lower creditworthiness of the country. This will translate into higher interest costs which leave less money to be spent on running and developing the country. The economy is expected to weaken as uncertainty holds a back investment, not just by local businesses but especially by foreign investors who place emphasis on ratings and the outlook for a country when making investment decisions.<\/p>\n

In the same breath, and perversely, we could also see a near-term boost to some economic segments, especially export-oriented sectors, such as mining and tourism. In time, though, the Bank of Namibia will be obliged to raise interest rates to deal with higher consumer price inflation. From this sequence of events, it follows that, in time, the rating downgrade is followed by slower economic growth, higher consumer price inflation, and higher interest rates. The combination of these factors is called stagflation. This environment is a poor outcome that will hold back economic progress and social transformation. Of course, it would be naive to argue that this is entirely due to the ratings agencies\u2019 call. Rather, this poor economic outcome was already on the cards. To explain, it\u2019s important to recognize that the rating agencies don\u2019t have access to more or better information than the market at large and that their calls don\u2019t drive market movements. Rather, their decisions tend to lag rather than lead the markets, and in this way, generally confirm what we already know.<\/p>\n

By some measures, Namibia has been off the pace but not in bad shape. According to the Bank of Namibia, \u201cthe Namibian economy recorded a modest rebound in 2021 and recovered some of the ground lost in 2020. Following a record contraction of 7.9 percent in 2020, the Namibian economy is estimated to have expanded by 2.4 percent in 2021, aided by supportive macroeconomic policies. This recovery was driven by mining and quarrying, coupled with positive real value addition in the wholesale and retail trade, hotels and restaurants, and information and communication sectors\u201d. Well done!<\/p>\n

Moreover, if we choose to ignore the message that is being provided by the rating agencies that our financial position needs attention and our growth prospects look poor, then we risk slipping further into sub-investment grade. If we choose to treat this downgrade as a wake-up call and we work together as a nation to restore our economy to a sound footing, introduce pro-growth policies, restore political certainty and fiscal discipline, stop corruption, reduce inequality and generate solid, inclusive economic growth, then our sojourn into sub-investment grade will be short-lived and we can bounce back a stronger, united Namibia.<\/p>\n

To this end, Namibia is our home, we drive her growth. Critically, a point that should not be lost is that as much as the rating call is by an external agency, the repair required is domestic and includes public and private sector facets. The first is high private sector savings rates fuelling high domestic investment levels. The second is sound monetary policy that has been effective in managing the risk of consumer price inflation running away during the recovery.<\/p>\n

A downgrade isn\u2019t good for any country but it\u2019s also not all doom and gloom. Our response and our actions as a country and as its citizens will determine whether we drift downwards into recession and even default on our debt or we bounce back as a stronger Namibia. As individuals, it\u2019s important to be active citizens.<\/p>\n

For More News And Analysis About Namibia<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – Namibia. by Josef Kefas Sheehama Namibia\u2019s Rating Downgrade: Moody\u2019s \u00adupgrades Namibia\u2019s \u00adoutlook to stable from negative to stable while long-term issuer and senior unsecured ratings to B1 from Ba3. Government is not a person, but rather it is an instrument given to a body of people to uphold the institutions to govern society. […]<\/p>\n","protected":false},"author":84,"featured_media":16589,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,6,8,16],"tags":[234,236,233],"class_list":["post-16590","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-files","category-homepage-english","category-twitter","tag-africa-press","tag-africa-press-namibia","tag-namibia"],"yoast_head":"\nNamibia\u2019s Rating Downgrade: The impact on a country and its people - Namibia<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/namibia\/all-news\/namibias-rating-downgrade-the-impact-on-a-country-and-its-people\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Namibia\u2019s Rating Downgrade: The impact on a country and its people\" \/>\n<meta property=\"og:description\" content=\"Africa-Press – Namibia. by Josef Kefas Sheehama Namibia\u2019s Rating Downgrade: Moody\u2019s \u00adupgrades Namibia\u2019s \u00adoutlook to stable from negative to stable while long-term issuer and senior unsecured ratings to B1 from Ba3. 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