Govt wonÔÇÖt borrow from IMF, World Bank
Government has reaffirmed its position of not borrowing from the Bretton wood institutions because of the conditions associated with the loans The Villager understands.
This was unequivocally stated by the Director of Asset, Cash and Debt Management Angelina Sinvula, who maintained that Namibia currently has no loan programmes with the IMF.
“However, due to Namibia being a member of the IMF and the World Bank, we have been receiving technical assistance in the field (sovereign debt management and sustainability programme, budget management) of Public Finance Management,” she explained.
The loans’ terms and conditions from Bretton Wood Institutions are currently not favourable, and will not be sustainable for Namibia. “Maybe in the future, the country may consider it. But not for now,” Sinvula stressed.
Government has told the Villager that it will continue to maintain their borrowing plan, where 80% of the funds are generated from the domestic market and the remaining 20% would be generated from the international market.
In the 2015/16 financial year, Government was set to use roughly N$8.1 billion from domestic borrowed funds for its operations due to budget deficits as it leaned towards domestic borrowing. This amounted to 94% of the total budget deficit for the 2015/16 financial year, which stands at N$8.64b.
The Government’s current level of indebtedness is very low at 25% when compared against the local Gross Domestic Product (GDP). In addition, it is lower than the tolerance threshold of 35%.
The Permanent Secretary in the Ministry of Finance, Ericah Shafudah told the Villager last year that overall debt as at July 2015 showed domestic debt standing at 72% of total debt, while 28% was foreign currency- denominated debt, excluding Randdenominated debt.
At the time, total government debt against the Gross Domestic Product (GDP) was at 25%, of which 18% is domestic debt, whilst 7% is foreign debt, excluding Rand-denominated debt.
As part of its foreign debts (or loans), Government intended to raise N$7.5 billion through floating bonds on the Johannesburg Stock Exchange (JSE) instead of the initial target of N$3.5billion set a few years back during the tenure of Minister Saara Kuugongelwa-Amadhila.
This was the second time the Government turned to the JSE after previously raising a N$800 million bond to fund the budget deficit earlier in the year. This was also a continuation of the medium-term note programme of the N$3 billion bond the government listed in 2012 with the JSE, whereby it raised N$850 000.
Those funds were able to partly finance the budget deficit for the 2012/2013 fiscal year. Government was set to also list another N$800m bond with the JSE, which was meant to partly finance the budget deficit of 2015/16.
Finance Minister Calle Schlettwein could, however, not tell The Villager how much the N$800m JSE bond was set to raise, saying that he will reveal that information at a later stage.
The country tapped into the JSE because it was trying to avoid foreign exchange costs when listing with larger markets. The listing will also help with reserves, and was part of the complete borrowing plan.
The JSE is the only international market the government has listed on, which means Namibia manages its debt really well. The Government also borrows funds for infrastructural development.
Since development/ infrastructural expenditure is of a long-term nature and thus only yields returns over a longer period, it is imperative for Government to balance the composition of debt by choosing bonds, which are a long-term source of financing for infrastructure projects.
In terms of its membership, Namibia has so far contributed N$3 792 000 in membership fees and subscriptions to the World Bank Group, The Villager can reveal. Late last year, the World Bank asked for the support of members of the African Caucus to raise funds to replenish the International Development Association (IDA).
The institution needs to raise roughly US$135 million (approximately N$18.6b) in order to finance development, and to also attract and leverage new public investments. However, the Government had no intention of lending financial support to the World Bank Group (WBG).