Government's borrowing plan questioned

Cirrus Capital has expressed concern over the lack of clarity surrounding the government’s “additional financing requirements" following the tabling of the mid-term budget late last month, saying it may raise questions about Namibia’s future debt-to-gross domestic product (GDP) ratios.

The views are outlined in its borrowing plan update, prepared by fixed income analyst Pandu Shaduka.

According to Cirrus, the budget review revealed poor execution rates for the increased allocation to development spending.

The execution rates for the first six months of the fiscal year stood at 48.0% for operational expenditure and only 37.4% for development expenditure, including committed expenditure.

“As such, the [finance] ministry elected to reallocate some of the development budget to operational spending in order to address emergency issues – namely, drought and food provision,” Cirrus said.



Domestic market

Cirrus added that this reallocation has resulted in reduced foreign financing from the African Development Bank (AfDB) for project financing, decreasing from N$2.4 billion to N$1.3 billion, thus placing increased reliance on the domestic market to meet the financing requirements.

“Additionally, the government initially made no provision for the redemption of the GC24 – about N$1.3 billion – after aiming to switch the majority of the bond's outstanding nominal value domestically,” it said.

While there was an expectation that budget deficits and debt issuances would decrease in the future, the lack of transparency around the financing requirement has not been adequately addressed.

“Additionally, we have no indication of what the 'Additional Financing Requirement' denotes. While we expect deficits and debt issuances to decrease over the medium-term expenditure framework, the lack of transparency on overall issuance is a misstep and places future debt-to-GDP levels in question,” Cirrus said.