By: Nghiinomenwa-vali Erastus
The government wants to borrow up to N$15.3 billion from various financiers, including individuals, institutions, and others, to meet its budgetary commitments and repay maturing debts during the current financial year.
This 2024/25 financing need represents an increase of N$1.9 billion from last year, indicating that the government will borrow approximately N$28.6 billion over two years.
The heightened need for borrowing over the past two years stems from the necessity to repay some of the government’s maturing loans and bonds.
According to the 2024/25 Financial Year Borrowing Strategy, the national budget estimates a deficit of N$8.9 billion, representing 3.2 percent of GDP.
This deficit persists despite the Namibia Revenue Agency (NamRA) collecting N$90.4 billion, while the government needs N$100.1 billion.
Additionally, the government faces foreign loan principal repayments amounting to N$2.7 billion this year.
The treasurer has also indicated that additional financing requirements of N$3.6 billion will need to be funded this year, bringing the net financing needs for the 2024/25 financial year to N$15.3 billion.
However, details on what constitutes this additional financing and why it was not included in the national budget remain unclear.
The Borrowing Strategy reveals that N$12.8 billion of the financing requirement will be sourced domestically.
Domestic borrowing is preferred over foreign borrowing as it mitigates exchange rate fluctuation risk, particularly given the strength of the US Dollar.
Sourcing funds locally also provides investment opportunities for institutions and individuals with savings, ensuring adequate instruments for investment in the capital and money markets.
The domestic market borrowing (N$12.8 billion) will be distributed among three local classes of instruments: Treasury Bills, Fixed-rate bonds, and Inflation-linked bonds.
A significant portion (N$8.8 billion) will be borrowed through fixed-rate bonds, N$2.9 billion through Treasury Bills, and N$1.1 billion through inflation-linked bonds.
The remaining N$2.4 billion will be borrowed from external sources, specifically from the African Development Bank (N$1.751 billion) and Germany’s Kreditanstalt für Wiederaufbau (N$683 million).
These institutions previously lent the government N$2.7 billion last year, with the African Development Bank providing N$1.2 billion and Kreditanstalt für Wiederaufbau providing N$1.6 billion.
The treasurer and the Bank of Namibia explained that the funding plan was designed with careful consideration of current market conditions and future projections.
“It aims to address the needs of our investors while ensuring sustainable growth and stability,” the treasurer explained.
The plan prioritises upcoming bond redemptions and includes additional financing requirements to maintain a stable supply of government paper during the current fiscal year.
The fiscal policy custodian emphasised the importance of incorporating investors’ views into the borrowing activities, highlighting the benefits to all stakeholders and the positive impact on the local bond market and overall government objectives.
The Borrowing Strategy was released two months after the financial year ended, leading the Bank of Namibia to begin borrowing before its release.
It remains unclear how much of the financing requirement has been borrowed to date, as the Central Bank has yet to respond.
erastus@thevillager.com.na
