In terms of the 2022/23 Fiscal Strategy of the ministry of finance, the country net borrowing requirement stands at around N$82 billion in four years.
This means for the past four financial years, the government needed around N$82 billion to fill the budget deficit.Out of that, around N$19,4 billion was foreign funding.
Thus, the Namibian debt accumulation has increased from N$69,9 billion in 2016 and is projected to go up to N$140.2 billion by March 2024, which is an increase of 71%.
By March 2025, the government will accumulate N$165,5 billion or 75.2% of the country total production (GDP), according to the 2022-23 Fiscal Strategy
Due to the level of debt accumulation, researchers from the Institute of Public Policy Research (IPPR) have suggested for the power to approve foreign loans be shifted to parliament.
“Parliament should be given the authority to approve all foreign loans to the public sector as is the case in neighbouring Botswana for example,” IPPR said.
According to the institute’s explanation, the move will oblige the minister of finance to explain to parliament why a loan is being taken, what its impact will be and how it will be repaid.
“As things stand, loans seem to be taken out willy-nilly based on private negotiations between government officials, donors and investors” the IPPR wrote in their report.
They further supported their suggestion that government has spectacularly failed to adhere to its own public debt target of 35% of GDP set in 2012/13, “primarily because it has always been easier to borrow more than make painful decisions on cutting spending”.
As a result, public debt is now at a level where alarm bells have started to sound the researchers wrote and asking what the country have to show for, for its borrowing.
As a consequence, and in parallel with rising levels of debt, Namibia’s sovereign credit rating has steadily deteriorated, the researchers highlighted.
This means Namibia is decreasingly seen as a “safe bet” and makes it harder or more expensive to raise funds internationally.
In his foreword for the 2022-2023 Fiscal Strategy, minister Iipumbu acceded that government’s fiscal position is under pressure, with revenue collection to take some time.
He supported argument that some structural challenges in the economy led to persistent decline in revenue that further resulted in high deficit levels and debt stock accumulation.
The Namibian economy entered a period of stagnant economic growth between 2016 and 2020, with growth averaging 1.9%.
A combination of droughts, low commodity prices and recession has led to slow economic activity and later the outbreak of Covid-19 that affected domestic and global demand.
The IPPR researchers are also demanding a comprehensive and detailed account of Namibia’s public debt to be published as part of the national budget which would be a more detailed version of former minister Schlettwein’s media release of 2019.
“This will serve to reassure both the general public and the local and international investor community,” wrote the researchers.
The ministry of finance and public enterprises is also asked to develop the capacity to carry out debt sustainability analyses on a regular basis, preferably before agreements on any new loans are entered into, with all loans to be subjected to greater economic scrutiny.
The researcher explained that some loans, possibly in energy or oil and gas, may give rise to clear revenue streams which can be used to repay the loan, however, undertaking loans especially in sectors like water and roads, do not.
Adding that although politiciansargue that new infrastructure automatically gives rise to economic growth and more revenue to government, there is little evidence to support their theory, especially if infrastructure projects have not been properly assessed beforehand.
The IPPR team has also highlighted that the ‘what is a sustainable level of public debt for Namibia’ is not straightforward question since it depends on the ability to repay which in turn depends on the conditions of each loan.
Furthermore, what loans are used for, whether they result in improved economic performance and whether that gives rise to additional revenues that can repay them.
Whatever the case, the researchers have indicated that the Namibian debt is approaching levels that in other countries have led to debt distress.
“It should in future be much more cautious about taking on new debt. Just because someone offers you a loan does not mean you should take it,”the IPPR said.