Reserve stock sustainable despite inﬂux from loans
Finance Minister Calle Schlettwein has conﬁrmed that the international reserves which got a mega boost to an all-time high of N$32.7 billion will be sustainably beefed up by other revenue alternatives.
This is despite reservations from analysts who have rubbished at the boost as a loud sounding nothing since the stock is not based on export proceeds. However, Schlettwein has pinned hope on the SACU revenues which make an enormous contribution to the local GDP while indications are that revenues for the 2017 ﬁnancial year are way better than those of the previous year.
“The current hike in reserves is because of the AfDB loan but as to sustainability, the SACU income was up this year compared to last year and we believe that the reserve stock is already beefed up in addition to the loan proceeds that have been put in,” said the minister.
Despite their ﬂuctuating nature, the recently noted improvement in the prices of commodities Namibia trades in on the world market will further add to the reserve stock, Schlettwein said.
Uranium which had earlier been projected to be the country’s primary growth driver continue to perform dismally, and Namibia is yet to get anything out of it. “We see that commodity prices are moving in the right direction, the goods that we are trading in where we get good proceeds like copper and zinc. So our trade balance could improve, and that will add to the sustainability of the reserves,” he told The Villager.
Thus pinning hopes on the probability of prices tipping in favour of the economy, the minister went another mile to express enthusiasm at the production levels currently being witnessed at Husab Mine, the world’s second largest uranium mine.
“For Uranium the price is the problem regarding the costs but production has increased very signiﬁcantly, and that is 5 percent of GDP. So we, therefore, believe the Husab Mine alone could add to the sustainability of our stock,” said the minister.
For Twilight Capital Director and economic analyst Mally Likukela once outstanding invoices have been paid out, the reserve stock is destined to go down.
“We are only going to improve our reserves when we start to export more. That reserve you get from exports become the real reserve because that one is not going anywhere in the shortest period. But for this one as soon as we pay out outstanding invoices, that reserve will go down again.
So it is not sustainable. It is an overnight growth which will just ﬁzzle out in a few months’ time. So we cannot rely on that,” he submits. He sums up the stock is “more money on its way” thus putting its sustainability to question, “The growth that we saw in reserve, I would not say it’s growth at all because this money is on its way,” stamps Likukela.
He further rubbishes Schlettwein’s optimism in commodity prices citing that proceeds from Zinc and copper will not be signiﬁcant enough to make any improvement to national coffers. “Copper and zinc will not make any improvement. Remember those commodities are sold on a contractual basis. You enter into a contract to sell this much for a certain length of time. So changes in commodity prices are not necessarily a reﬂection of an increase in revenue,” says the economist.
He sees the impact of the resuscitation in global commodity prices as coming a long way to be felt back at home, “Even if today prices go up you cannot see it in a short period, and that is the nature of mining.”
He further submits that “What needs to be asked about is not sustainability per se but whether this reserve is sufﬁcient. Our reserve is always on the border line and is not enough.”