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Budget deficit forces Govt. to borrow on JSE again

Mon, 10 November 2014 04:36
by Linekela Halwoodi
News Flash


The Ministry of Finance will turn to the Johannesburg Stock Exchange to raise funds for the budget deficit for the second time, after it successfully listed a N$3b bond program, that has raised N$850m to date.
Those funds were able to partly finance the budget deficit for the 2012/2013 fiscal year. The Ministry of finance cannot confirm the amount, and says it will be announced as per the Mandated Lead Arrangers, close to the auction date.
The Villager however, understands that fiscus wants to raise about N$1.5billion.
The Mandated Lead Arrangers (MLAs) for the JSE bond are Absa Capital (Barclays) with Namibia Equity Brokers and Rand Merchant Bank (RMB).
Currently, Namibia’s total debt as a percentage of the GDP is below 25%, at 24.4%, which is lower than the threshold of 35%.
“During the 2014/15 fiscal year the Government plans to tap from the same listed facility “the JSE”, preferably during the third term of the fiscal year. However, the amount to be issued from this facility will be subject to cash flow requirements of the Government and when market conditions suite the issue” Minister of Finance Saara Kuughongelwa-Amadhila said. She told The Villager that the JSE is the only international market the government has listed on.
“The purpose for Government to issue bonds in the international markets is mainly to diversify the Government funding sources and further to create benchmark for Namibian corporate entities who may wish to tap from the international market. The proceeds of the bond issue are aimed at diversifying the sources to finance the budget deficit” she added.
According to Kuughongelwa-Amadhila, the government had to turn to the foreign markets because the Namibian Sovereign Debt Management Strategy sets domestic borrowing at a ceiling of 80% of total debt, while on foreign borrowing the limit is 20%, which she says keeps the annual borrowing plan at 80:20 ratios.
“In this regard, a large share or 80% of the Government budget deficit will be funded through issuance of treasury bills and bonds in the domestic market. Only a smaller portion or 20% will be funded through foreign borrowing, i.e. JSE listed bond” Kuughongelwa-Amadhila said.
Finance says, the combinations of debt instrument will be issued in both the domestic and international market as per the ratios of 80:20.
“The Government budget includes revenue and expenditure components. The Expenditure component consists of operational budget and development budget that include infrastructure financing. Therefore, the operational expenditure combined with development budget is the main driver of the recurrent budget. It is worth noting that Namibia is a developing Country. Developing means that the country is still addressing the imbalances between the living standards of Namibia citizen.  At the same time, Government is investing in the infrastructure aimed to drive the economy forward. To meet those challenges, the Government had to spend more than the revenue earned, which resulted in the recurrent budget deficits and increasing the debt level,” Kuughongelwa-Amadhila said.
She added that government borrowing activities will employ the necessary strategies to ensure that debt ratios will be contained within the set benchmarks.
The minister adds that the government does not anticipate supplementary funds from SACU for the current fiscal year. SACU receipts are part of the revenue collection, as determined through a Revenue Sharing Formula.
Government has been trying to fill in the deficit create by the Targeted Intervention Programme Employment and Economic Growth (TIPEEG) which aimed at creating 104 000 jobs. However, although some degree of success has been achieved, analysts have blamed the programme for plunging government into heavy expenditure on a programme that did not have guaranteed results.