Debts, joblessness fuel latest rating downgrade

09 December 2019 | Economics

Rating agency Moody's downgraded Namibia's economy on Friday to a Ba2 rating but changed the outlook to stable, citing among other things rising government debt and waning job opportunities.

The country's debt burden has more than doubled over the past decade to 45.6% of GDP at the end of fiscal 2018 from 19.2% ten years earlier.

But, as could be expected, finance minister Calle Schlettwein criticised the latest downgrade of Namibia's creditworthiness, saying it demonstrated a “bias towards negativity” instead of recognising the positive progress the country has made to improve the economy.

On Friday Moody's stated that this downgrade reflected a further weakening in Namibia's debt position, despite ongoing fiscal consolidation, as growth remains weaker for longer than Moody's previously anticipated.





This generally means the government's long-term debt in foreign currencies, which is anything except debt in South African rand and Namibian dollar, are rated as two levels below junk.

According to Moody's, the stable outlook is underpinned by Namibia's relatively robust institutions and governance strength that supports creditworthiness.

It added that policymakers retain some capacity to respond to shocks, helped by moderate liquidity and external vulnerability risks.

Fitch Ratings in September also downgraded government's debt in foreign currencies to two levels below junk.

Speaking to Namibian Sun yesterday, Schlettwein said: “The rating is just a repeat. It shows a bias towards negativity and does not really take into account the positive progress.”

In a statement released later, the minister added that Namibia had demonstrated its resilience and ability to deal with shocks and to direct policy actions to addressing socio-economic development needs.

According to him, the government has made real progress to stabilise the macro-fiscal framework when Moody's downgraded Namibia to sub-investment grade in 2017.

“This progress includes the proportion of Gross Domestic Product (GDP) which has reduced from 8.1% in the 2015 and 2016 financial year to about 4.1% by the 2019 and 2020 financial while the year-on-year increase in public debt has sharply moderated to 11.2 % 2019/20, from the average of 30.1% three years ago.

“We are confident that these policy packages will place the economy on a firm positive and sustainable growth trajectory over the medium to long term. Throughout the years, Namibia has demonstrated its ability and resilience to deal with shocks and also to direct policy actions to addressing socio-economic development needs.”

“We, therefore, remain optimistic that growth prospects will gain traction as the implementation of the adopted measures is scaled-up.”



Highly ambitious

Rowland Brown, co-founder of Cirrus Securities, says the Moody's downgrade came as no surprise, adding that the “stable” outlook is highly ambitious.

Brown believes that Namibia's fiscal outlook is rather heavily weighted to the downside at present and that revenue will likely remain under pressure.

“It is also worth noting that both the ratings downgrades, as well as the current recession and depression, were completely avoidable.

“Moreover, it is worth noting that recovery is very possible, however increasingly complex. As far back as 2015, it was easy to see that Namibia was facing material macroeconomic challenges; however, a combination of poor advice and weak implementation of specks of good advice meant that the downgrading of the country was not avoided, and now the current economic recession has dragged out for three long years, with little imminent hope of meaningful recovery.”

According to Brown, rising unemployment will increase demands on finite government funds, the weak business environment will increase demands on the shareholder from state-owned enterprise (SOEs) and debt payments will continue to rise, from their current approximate N$7 billion a year.

According to Brown, it has become clear that after three years of no growth, and despite efforts to drive fiscal consolidation, a meaningful growth recovery and dramatic fiscal improvement are not forthcoming.

He pointed out that domestic economists in the past warned of an impending abrupt growth slowdown and ballooning fiscal deficit and debt.

“Yet Moody's reaffirmed our investment grade rating, thus allowing Namibia to issue its second Eurobond. It is our view that they remain behind the curve now, and that the 'stable' outlook is highly ambitious,” he said.

[email protected]

JEMIMA BEUKES

Similar News

 

Fewer than 190 000 formally employed

1 week ago - 21 January 2020 | Economics

Namibia had just under 190 000 formally employed people in the private sector by 2018.This is according to a new Institute for Public Policy Research...

No Brexit blues for Namibia

1 week ago - 20 January 2020 | Economics

No obstacles are foreseen for Namibia from a trade point of view as far as Brexit is concerned, local stockbroking firm IJG Securities said in...

Debts, joblessness fuel latest rating downgrade

1 month - 09 December 2019 | Economics

Rating agency Moody's downgraded Namibia's economy on Friday to a Ba2 rating but changed the outlook to stable, citing among other things rising government debt...

Interest rates remain unchanged

1 month - 04 December 2019 | Economics

The Bank of Namibia (BoN) this morning left its repo rate unchanged at 6.5%.This means the prime lending rate of local commercial banks will remain...

Gender inequality hits home

1 month - 04 December 2019 | Economics

Gender discrimination in the labour market and the high youth unemployment rate needs to be tackled in order to close gaps in the housing market...

IMF chief urges debt wisdom in maiden Africa visit

1 month - 04 December 2019 | Economics

Diamniadio - New International Monetary Fund chief Kristalina Georgieva this week highlighted Africa as a lure for investment as she kicked off her maiden visit...

Sudan militia leader grew rich by selling gold

1 month - 04 December 2019 | Economics

Khalid Abdelaziz, Michael Georgy and Maha El Dahan - Late last year, as former president Omar Hassan al-Bashir's hold on power weakened, one of Sudan's...

Zimbabweans grow more despondent

2 months ago - 20 November 2019 | Economics

Fanuel JongweTwo years ago, Linos Mutepera was among hundreds of thousands of Zimbabweans who celebrated the toppling of long-time ruler Robert Mugabe with tears of...

Many pitfalls in reform of Africa's CFA franc

2 months ago - 20 November 2019 | Economics

Pierre Donadieu and David Esnault - Calls to overhaul the West African CFA franc, a currency tied to the euro and historically rooted in French...

Fact file

2 months ago - 20 November 2019 | Economics

The CFA franc, a seven-decade-old currency shared by more than a dozen states in West Africa, has found itself in the spotlight over calls for...

Latest News

No evidence of ritual killing

22 hours ago | Crime

The police are contemplating DNA tests, if the police kitty allows, to identify the young Zimbabwean girl whose charred remains were found in a garbage...

Lightning kills 11 cattle in...

22 hours ago | Accidents

A farmer at Epingiro village in the Kavango West Region's Ncamagoro Constituency suffered a loss when lightning killed 11 of his cattle on Sunday evening....

A day in the life...

22 hours ago | People

Michelline Nawatises Samuel Mayele Nghipandulwa is 23 years old and hails from Ruacana, Oshifo. He started grade one and two at Oshoopala Combined School and...

Land question remains unanswered

22 hours ago | Opinion

We have said before that land reform in Namibia, which is currently a hot topic, should not be politicised. There is a general agreement that...

The importance of a pat...

22 hours ago | Columns

Ester KamatiWe often overlook how important it is for a person to be thanked or praised after they’ve put their energy into something which eventually...

Judges throw out shocking spliff...

22 hours ago | Justice

A N$4 000 fine or two-year prison sentence for possession of a single two-gram dagga joint worth N$20 was tossed out by two High Court...

Your future in dance awaits

22 hours ago | Youth

Ester Kamati The Ombetja Yehinga Organisation Trust has the main mandate to create social awareness through the arts and has been doing so for the...

The youth speak up

22 hours ago | Education

Elizabeth JosephYoung people all over Windhoek came together this weekend to discuss ways in which the health ministry and the government can make hospital facilities...

Grade 1 class receives hope

22 hours ago | Education

Elizabeth Joseph Many Namibian children go to school without shoes or so much as a meal to get them through the day. The children...

Load More