Govt Wantsto Borrow N$3 Billion in Five Months

By:Nghiinomewnwa-vali Erastus
For the remaining five months of the current 2022/23 financial year ending 31 March, the government is expected to borrow about N$3 billion from individual and institutional investors.
This is after the government’s total borrowing needs for the current financial year was reduced by N$400 million, from N$12.6 billion to N$12.2 billion, the Bank of Namibia reported last week.
However, this is still high compared to what has been estimated in the fiscal strategy which projected the budget deficit for the 2022/23 financial year to be around N$11.1 billion in domestic borrowing.
The central bank, which borrows on behalf of the government, updated the public that from last year’s April to October 2022, actual borrowing figures amounted to N$9,1 billion.
For the remaining months (November 2022 to March 2023), the central bank targets to borrow from the domestic market N$3 billion through treasury bills and bonds (fixed rate and inflation-linked), allowing those who want to invest in government debt another chance.
Treasury bills are financial instruments through which the state borrows. The Government also issues bonds from time to time depending on the magnitude of the funding requirements and in consultation with the market.
According to the borrowing plan released by the central bank, investors can lend to the treasurer through treasury bills auction, with government planning to borrow about N$414 million through short-term instruments.
For those who want to go in for a long period, various fixed-income bonds are available, especially from the GC32 to the GC50, with bids for bonds going for a minimum of N$50,000 and tendered in multiples of N$10,000.
For the latest reduction, no reasons were given by the central bank, however, the mid-term review from the treasurer has given some clues.
According to the treasury updates, the preliminary revenue outturn at the end of September 2022 stood at N$30,4 billion, representing 51% of the initial revenue projections and about 3.0 percent higher than the historical mid-year collection rate.
The treasury explained that strong revenue performance reflects the observed recovery in domestic economic activities coupled with some early gains from tax administration reforms.
The treasurer has indicated that the medium-term fiscal framework has also revised revenue for FY 2022/23 upwards by N$4,4 billion, from the indicative N$59,7 billion contemplated previously in the main budget to N$64,1 billion.
This represents about 7.9% year-on-year growth in revenue from the previous year.
Over the medium term expenditure framework (MTEF) period, the revenue is forecasted to grow by an average of 7.4% to reach about N$78,3 billion by FY 2025/26.
The treasurer added that the positive adjustments in revenues for 2022/23 reflect strong collections year-to-date, mainly on the categories of income tax on individuals, corporate tax on both diamond mining companies as well as non-mining companies, value added tax, and dividends from entities such as DebMarine Namibia.
In terms of debt accumulation, which represents how much the government borrowed from the market and elsewhere shows that at the half-year mark, the total debt stock stood at N$136.2 billion, equivalent to 69% of GDP.
The public debt stock is now expected to increase to N$138.4 billion, equivalent to 69.6 percent of GDP in FY 2022/23.
Over the MTEF, the pace of debt accumulation is projected to peak in the next financial year resulting in a stabilisation of the debt ratios over the remainder of the MTEF, according to the treasurer.
Interest payments are also revised down slightly to N$9.1 billion in financial year 2022/23, equivalent to 14.3 percent of projected revenues for the year.
Debt servicing costs continue to trend above the country’s desired benchmark of 10% of revenues.
This adds further impetus to the call to stabilise the pace of debt accumulation, going forward, the treasurer noted during the mid-year review.
Overall, the budget deficit (revenue minus expenditure) is projected to decline to about 5.3% of GDP in financial year 2022/23 compared to 5.6 percent estimated in the main budget in February 2022.
Over the MTEF, the deficit is projected to average about 2.4 percent of GDP; this will either mean more revenue or a reduction in expenditure.
According to the treasury team estimation they aim to realise a positive primary budget balance in the coming financial year financial year 2023/24 and maintain it over the medium term thereby setting the public debt metrics on a downward trajectory. Email: erastus@thevillager.com.na