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WE DO NOT HAVE HIDDEN CHINESE LOANS- TREASURER

By: Nghiinomenwa Erastus

The country treasure has denounced findings that Namibia is hiding debts worth 10% of the country GDP, primarily secured from China to public enterprises.

According to the information received from the team Ministry of Finance headed by Iipumbu Shiimi, for the past ten years, the country has only secured N$2,1 billion.

Treasury responded that it is of concern and irresponsible reporting from the AidData regarding the so-called hidden financial relationship between Namibia and the Government of the People’s Republic of China. 

“We would like to inform you that such data are made with the intention only known by those expressing them,” the treasury responded through their spokesperson Wilson Shikoto.

Namibia debts were scrutinised by AidData, a research lab in the USA that studied 13,427 Chinese international development finance projects worth $843 billion. 

The lab found that low- and middle-income countries worldwide have been accumulating billions of dollars worth of hidden, off-balance sheet debt from state-owned and private financiers in China over the past two decades. 

The report estimates that Namibia has hidden debts worth 10% of GDP, which, if clumsily added to the country’s public known debt to GDP ratio, can approach 80%.

While, according to the report, this debt is issued mainly to public enterprises, many of them benefit from government guarantees or liability protection. 

The upshot is that the findings highlight that the full extent of Namibia’s public debt might be unknown, according to international investigators.

Internally the custodians of the country accounts through Shikoto explained to The Villager investigation team that the treasury records show the total loans from China amounts to N$2,1 billion, equivalent to 1% of GDP.

This represents 7% of foreign debt and only 2% of total debt.

These loans are divided as follows: interest-free loans of N$411 million and loans of 2% interest rate of N$1,732 billion. 

Using the Banks of Namibia latest Quarterly Bulletin, by last year, Namibia foreign bilateral loans were worth N$2,7 billion- showing that most of Namibia bilateral debts emanated from one country.

On how some of the loans were utilised, Shikoto explained that in their records shows that to date, there were only two loans issued to public entities, namely the Northern Tannery and TransNamib. 

“Thus far, these loans have been fully paid off,” said Shikoto.

However, the operation of the Northern Tannery to date is questionable, while TransNamib is still dragging its feet in terms of growth.

The government did not specify the dollar value of interest paid or paid; however, it indicated an average interest rate of 2%, in line with the loan amortisation schedules, agreed between the parties.

The amortisation period/maturity period ranges from 15 to 20-year repayment period.

AidData scrutiny also found that collateralisation is Beijing’s ‘go-to’ risk mitigation tool- with 40 of the 50 most significant loans from Chinese state-owned creditors to overseas borrowers collateralised. 

The ministry indicated that no collateral or guarantee had been issued to any Chinese Financial Institution to date. 

“All loans taken by the Government of the Republic of Namibia were uncollateralised, and no security was required.

The insight provided by Kimber Brain, a junior economist at IJG, in the Economic Pulse newsletter, indicated that there is no recourse to say whether the hidden Chinese debt, issued as part of Beijing’s Belt and Road Initiative, is better or worse than other forms of public debt. 

However, he explained that the projects it finances are often inherently riskier than conventionally financed projects, and therefore the issuers are entitled to demand stronger repayment safeguards.

He added that “these loans are collateralised in novel, unconventional ways”.

Yet this hidden debt is not the main problem, nor is it that public debt limits the amount spent on other government services, although both issues do matter.

Instead, Brain explained that Namibia had developed a multi-dimensional public debt burden that has left it accountable, in ways known – and if the AidData report is accurate, also unknown – to both its citizens and foreign entities.

“This makes developing a coherent public debt repayment strategy more challenging,” he wrote.

By the end of March 2021, the central government debts will reach around N$127,7 billion, approximately 69% of the country’s production level.

With such debts (foreign and domestic), the country will direct between 15-17% of its revenue to interest payment. Email: erastus@thevillager.com.na

 

Julia Heita

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