Namibia’s debt strategy nears market limits, Simonis Storm warns
Overheating
Government's local borrowing strategy faces saturation point
Simonis Storm has cautioned that Namibia’s strategy to fund its fiscal deficit through local debt issuance, rather than external borrowing, is approaching the market’s absorption capacity. In its latest borrowing plan report, the firm highlighted the risks of over-reliance on domestic instruments and the critical need for precise management of the upcoming US$750 million Eurobond repayment, as the country braces for a high-stakes fiscal year 2025/26.
“The shift toward long-dated domestic instruments is strategically sound. It reduces short-term funding pressure and gives the Treasury more breathing room, but we have reached a point where the market’s absorption limits are becoming visible. We said this six months ago, and the auction trends are validating it,” Simonis Storm said of the government’s strategy to fund its fiscal woes.
While the dependence on local debt issuance protected Namibia from foreign exchange externalities, it was placing local institutions under pressure to hold domestic debt.
“The growing dependence on domestic debt issuance has shielded Namibia from global volatility—but it is also intensifying pressure on local financial institutions. Pension funds, banks, and insurers already hold large government exposures. We have said it before: portfolio concentration is rising, and so are implicit yield demands. If liquidity tightens or inflation expectations rise, bid-cover ratios will come under strain and borrowing costs will edge up—perhaps quickly,” Simonis Storm said.
Simonis Storm also called on the government to carefully manage the repayment of the US$750 million Eurobond obligation due later October this year. The government had placed over US$400 million in a sinking fund to help redeem the Eurobond obligation.
“Meanwhile, the external side carries real risk. The Eurobond must be handled with precision—any slippage could trigger rating pressure or destabilise foreign exchange expectations. We will continue tracking every auction, every maturity, and every foreign inflow,” it said.
The government would further be required to exercise due caution with regards to the management and allocation of its fiscal resources, Simonis Storm said.
“The story for fiscal year 2025/26 is not just about how much Namibia borrows—it is
about how it borrows, who absorbs it, and what confidence it can sustain in the process. We are entering a high-stakes fiscal year. Execution discipline will be everything,” Simonis Storm said.
“The shift toward long-dated domestic instruments is strategically sound. It reduces short-term funding pressure and gives the Treasury more breathing room, but we have reached a point where the market’s absorption limits are becoming visible. We said this six months ago, and the auction trends are validating it,” Simonis Storm said of the government’s strategy to fund its fiscal woes.
While the dependence on local debt issuance protected Namibia from foreign exchange externalities, it was placing local institutions under pressure to hold domestic debt.
“The growing dependence on domestic debt issuance has shielded Namibia from global volatility—but it is also intensifying pressure on local financial institutions. Pension funds, banks, and insurers already hold large government exposures. We have said it before: portfolio concentration is rising, and so are implicit yield demands. If liquidity tightens or inflation expectations rise, bid-cover ratios will come under strain and borrowing costs will edge up—perhaps quickly,” Simonis Storm said.
Simonis Storm also called on the government to carefully manage the repayment of the US$750 million Eurobond obligation due later October this year. The government had placed over US$400 million in a sinking fund to help redeem the Eurobond obligation.
“Meanwhile, the external side carries real risk. The Eurobond must be handled with precision—any slippage could trigger rating pressure or destabilise foreign exchange expectations. We will continue tracking every auction, every maturity, and every foreign inflow,” it said.
The government would further be required to exercise due caution with regards to the management and allocation of its fiscal resources, Simonis Storm said.
“The story for fiscal year 2025/26 is not just about how much Namibia borrows—it is
about how it borrows, who absorbs it, and what confidence it can sustain in the process. We are entering a high-stakes fiscal year. Execution discipline will be everything,” Simonis Storm said.
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