Currency weakness to push government debt in third quarter

In the wake of an observed increase in central government’s debt in the second quarter of this year, experts are convinced debt will go higher up in the final quarter owing to currency depreciation.


The increase in debt is also anticipated to be pushed by another disbursement of the African Development Bank loan agreement, an analyst at PSG Namibia, Eloise Du Plessis warned. 

Said she, “The increase in debt servicing costs crowds out government expenditure on economic development. The government is not expected to tap Eurobond markets anytime soon and has adopted a fiscal tightening stance to curb the deterioration of the public debt-to-GDP ratio.”

“Finance Minister Calle Schlettwein will give an update of the government’s fiscal policy targets during the Mid-year Budget Review in the final week of October.”

Presently, according to figures by the central bank, the central government’s debt stock increased by 5.8% qaurter on quarter to N$78.3bn in the second quarter.

This was fuelled by a rise in domestic borrowing to fund public expenditure and higher foreign debt stemming from the depreciation of the Namibian dollar.

Total domestic debt went up by 2.8% quarter-on-quarter to N$50 billion, owing to the higher issuance of Treasury bills (T-bills) and Internal Registered Stock (IRS), with the latter rising by 4.3% quarter-on-quarter and 1.9% quarter-on-quarter, respectively.

In turn, external debt rose by 11.5% q-o-q to N$28.3bn, owing to the depreciation of the local currency against major trading currencies.

Meanwhile, the local currency fell from N$11.86 to the US dollar at the end of the first quarter of 2018 to N$13.77 to the US dollar at the end of the second quarter.

Said Du Plessis, “Looking at a breakdown of the government’s foreign debt, Eurobond debt (60.5%) remained the major contributor to the government’s external debt stock, while the share of multilateral loans declined slightly to 18.4% in Q2 from 19.8% in Q1.” Furthermore, the share of bilateral loans (10.9%) and JSE listed bonds (10.2%) remained largely unchanged in Q2 compared to the previous quarter.”

She said nearly 61% of the government’s total outstanding foreign debt is denominated in US dollars, while roughly 22% is denominated in the South African Rand.


Experts have estimated that government debt has accumulated by 731% over the last ten years to N$72.9bn and thus the current adjustments “Fiscal consolidation” drove the economy into its 1st annual contraction.

“Over a short run, an increase in public debt arising from fiscal expansion stimulates aggregate demand, which should help the economy grow. However, over the long run economic impact of public debt accumulation can lead to constrained economic growth,” Simonis Storm Securities warned.