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Central bank upbeat about economic double-rating

By: Kelvin Chiringa

Despite a prolonged economic dry-spell, the central bank of Namibia is not worried about getting a negative rating ahead of a Fitch and Moody’s assessment set for April this year.

Already, on the 14th of January 2019, Moody’s announced a negative outlook for sub-Saharan African sovereigns in 2019 due to ongoing fiscal and external challenges.

The case for Namibia is such that the economy continues to limp with a negative outlook with the first external debt maturing in 2021, according to Simonis Storm.

“If you look at the situation last year, we also had rating agencies making an assessment on Namibia and similarly this year they will also do an assessment. Already we had some kind of engagement with Fitch and we do not really see major changes that will lead to rating changes for Namibia,’’

“Of course we know that growth remains subdued, but even if it remains subdued but that outcome is much better than the outcome we had seen in 2016, 2017 and 2018 as well So going forward we believe that picture becomes positive, so we will not be worried about getting a negative rating,” said the central bank.

Nevertheless, independent experts are of the view that pressure will continue to loom due to the increase in the debt repayment ratio.

According to Simonis Storm risks such as policy unpredictability and lack of fiscal discipline would have a negative implication on the rating and outlook of the Namibian economy.

“Moody’s and Fitch maintained a sub-investment grade on the Namibia local and foreign currency rating, with our estimated debt to GDP at 50.6%. With debt to GDP expected to remain on an upward trajectory (50.6% in 2019/20E by SS) coupled with sluggish GDP growth over the next 2-3 years, we believe that the outlook will remain negative (Moody’s) with a possible negative (currently Stable) outlook by Fitch,” the firm said in its report.

 The firm also affirms that the tone and projections from the budget speech on the 13th of March, respectively, will play a big role in the agency’s decision making.

Kelvin Chiringa

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