External debt to shoot up- PSG predicts

Inspite of foreign debt having declined in the first quarter of this year, according to the Bank of Namibia’s latest data, PSG Namibia has said expectations are that external debt is forecast to increase further this year.  

The total (private and public sector) external debt stock decreased (-2.0% quarter-on-quarter) to N$95.1 billion at the end of the first quarter of 2018.

 The central government’s foreign debt declined by 3.8% q-o-q to N$25.4bn in the first quarter.

The BoN ascribed this decrease to the appreciation of the local currency against major foreign currencies.

Private sector foreign debt declined by 1.8% q-o-q to N$65.7bn in Q1 2018, mainly due to decreased borrowing by enterprises in the mining sector.

In contrast, the external debt of parastatals increased by 6.7% q-o-q to N$4.0bn at the end of Q1.

Said PSG Namibia, “Private sector external debt is expected to grow moderately by 4.6% y-o- y to N$70bn by end-2018 due to softer demand for debt from the larger mines. Meanwhile, public sector external debt is forecast to increase by a hefty 14% y-o-y to N$34.4bn by end-2018 due to the continued pay-out of the $750m AfDB loan agreement.”

Eurobond debt (57.8%) remained the major contributor to the government’s external stock of outstanding debt.

“The government is not expected to tap Eurobond markets any time soon and has adopted a fiscal tightening path to curb the deterioration of the public debt-to-GDP ratio,” PSG said.

The disbursement of an African Development Bank (AfDB) loan has pushed up multilateral loans’ share of central government external debt significantly to 19.8% in Q1 from 9.0% a year earlier, while the shares of bilateral loans (11.1%) and JSE listed bonds (11.4%) have decreased slightly over the same period.

Nearly 60% of the government’s total foreign debt outstanding is denominated in US dollars, while 24% is denominated in rand.

The share of external debt denominated in the South African currency also rose significantly in Q1 (from 12.6% in Q1 2017) as a result of the AfDB loan, which is rand- denominated.