Banking sector liquidity decreases by N$200m

The Namibian banking sector’s liquidity levels decreased by N$200 million from N$3.2 billion to N$3 billion in the current period, the Bank of Namibia (BoN) said.

BoN said the effects of increasing the supply of credit to finance household and government borrowings has benefitted from domestic financing, and has thus reduced excess liquidity in the local financial markets over time. There is to some extent less liquid assets available to support increased borrowing activity.

Meanwhile, in the same period under review in 2013, the sector recorded liquidity levels of N$2.8b. Bank of Namibia (BoN) Governor Iipumbu Shiimi said this goes to show that the liquidity levels of the bank have therefore been within the normal ranges, and BoN has not observed any liquidity crisis in the country.

In terms of Government liquidity, Shiimi said they are stable, adding that the local Government debt is the lowest in the world. “The country’s finances at present are very prudent, and we need to keep it that way. We might have challenges which come our way, but they are manageable. The Namibian Government has always followed a prudent debt management policy, which stipulates that a large part of deficit financing should be raised in the domestic markets with the view to further deepening the domestic capital markets,” Shiimi stated.

Government is able to meet its current funding needs following the recent over-subscription of the Euro Bond. For instance, Government was able to raise 60% of the total amount it was set to borrow for the current financial year in the domestic and South African markets.

In the first half of the year, a total of N$4.17b was raised from the domestic market, and N$1.5b was raised on the Johannesburg Stock Exchange (JSE). As part of the debt market diversification programme, the Government successfully raised the second USDollar- denominated bond, worth US$750.00 million, equal to some N$10.38b at current exchange rates.

In the mid-term budget review, Finance Minister Calle Schlettwein said US$300m (N$4.1b) will be set aside as a measure to support the foreign reserves’ position, while US$450 million (6.2b) will finance developmental projects. This was a successful issuance, at a better coupon rate than the 2011 international bond, and it was three times more over-subscribed.

“The Government will maintain the 70/30 ratio of domestic debt to foreign debt policy over the medium to long-term in support of domestic capital markets’ development. The proceeds of this issuance will support the stock of international reserves, infrastructure project financing and programmes to improve the productive capacity of the economy,” he explained.

Schlettwein said the total budgeted revenue for the current financial year was estimated at N$58.4b, an increase of 11.4% from the N$52.47b budgeted for FY2014/15. “Due to the unfavourable economic environment, the revenue outturn for FY2014/15 stood at N$49.93 billion, which is a collection rate of 95.2%. The shortfall suggests that the revenue-collection targets for the current and subsequent years have to be proportionately adjusted downwards to align with the revised macro-economic outlook. Increased borrowing has to be undertaken to fund potential revenue shortfalls for the current budget, while expenditure for the next MTEF has to be reduced in line with the medium-term outlook,” he noted.

It is projected that the total revenue outturn for FY2015/16 would be adjusted down by 4.9%, from N$58.44b to N$55.57b. The mid-year collection rate as of the end of September 2015 stood at 42.3% of the revised estimate, compared to 46% collected during the previous corresponding period. Schlettwein said this pace of collection rate suggests that scaled-up collection activity has to be pursued, with the potential shortfall due to the adjustments made to be financed with additional borrowing.

“The total expenditure execution rate for FY2014/15 amounted to 97.6% of the N$60.20b budget. The operational expenditure execution rate, including interest payments, stood at 98.9%, while the development budget execution rate was 95.4 per cent of the net budget allocation. For the current FY2015/16, the total expenditure execution rate by the mid-year mark amounted to N$24.69b, or some 36.8%, compared to a 46.5% execution rate in the previous corresponding period. This execution, while in part subject to ongoing data reconciliation, suggests a rather slow budget implementation rate,” he stated.