By: Nghiinomenwa-vali Hangala
The Bank of Namibia, on behalf of the country treasury, has announced that it has changed its plan to borrow N$2 billion from outside because the domestic market is full of capital looking for growth avenues.
The central bank announced the move during a tender auction for 16 internal registered bonds, including inflation-linked ones.
The central bank announced that “considering the robust liquidity levels in the domestic market and the interest shown by domestic investors for tapping into local bonds, the government has resolved to reallocate a total of N$2.0 billion previously envisaged to be funded through foreign financing to the domestic market.”
This will adjust the government funding for the 2025/26 financial year (FY) to N$23.2 billion to be sourced from the domestic market, and N$6.6 billion from external sources. This is an increase from N$21.2 billion, which the government indicated that it would borrow from the domestic market, leaving N$8.6 billion to be financed through external sources in the FY2025/26 Borrowing Plan.
The treasury, together with the central bank, explained that the shift from the external market will allow the government to appropriately smooth its cash flow operations as the financial year progresses. At the same time, responding to the enhanced demand displayed by domestic investors in recent auctions.
The government’s borrowing is hinged on creating a balance between domestic and external sources in an 80:20 ratio, as set out in the Sovereign Debt Management Strategy 2025. This ratio mandates the government to borrow more from the domestic market compared to the external market for various reasons, one of which is to avoid currency exchange fluctuation.
The government observation on the liquid market also aligns with private entities utilising the capital market to raise capital.
Recently, Bank Windhoek announced that their auction on 19 August for the three-year Sustainability Linked Bond attracted bids amounting to N$525.5million, 1.75 times oversubscribed.
It is not only the government that requires capital, as the private sector, small and medium enterprises (SMEs) and project developers also seek capital. However, not all of them are able to utilise the capital market to raise funds.
According to the Africa Finance Corporation (AFC), the continent has nearly US$4 trillion in domestic institutional capital that it can tap into for infrastructure investment.
This is also true for Namibia, which has non-banking financial institutions with more than N$300 billion in assets.
The AFC indicated that the domestic capital pool could help bridge the US$100 billion-plus annual infrastructure investment gap.
The gap is exacerbated by debt-distressed public budgets, rising protectionism, as well as foreign direct investment and official development assistance, all of which are failing to keep up with the continent’s growing infrastructure needs. erastus@thevillager.com.na
