Fitch downgrades Namibia to junk
Fitch Ratings has downgraded Namibia's long-term foreign-currency issuer default rating (IDR) to 'BB+' from 'BBB-'. The outlook is 'stable'.
According to the ratings agency, the downgrade reflects weaker-than-forecast fiscal outcomes and the government debt-to-GDP ratio will continue to increase in the short term.
The country's economic recovery has been weaker than expected.
“This will leave debt in financial year 2019/20 at nearly double the ratio in 2014/15. The downgrade also reflects a weaker-than-expected economic recovery and our view that medium-term growth has shifted to a lower gear,” the agency stated.
Fitch noted that fiscal consolidation was temporarily interrupted in the current financial year.
“We forecast the general government deficit to narrow to 6% of GDP from 6.9% in 2016, against a revised government target of 5.3%.
However, this improvement is due solely to a one-off surge in transfers from the South African Customs Union (SACU) which we expect to lead to a downward adjustment in the receipts for 2019.
“The initially projected reduction in aggregate public capital spending will not materialise due to a N$2.5 billion capital injection in a new public infrastructure fund and to the settlement of previously unreported arrears worth N$2.7 billion arising from commitments undertaken in 2016.
“Total-spending-to-GDP will stabilise as lower non-wage current outlays will offset the rise in the payroll, interest costs and public investment.”
The government has revised its fiscal consolidation strategy, and no longer targets a reduction or stabilisation of debt-to-GDP, the ratings agency said.
“The latest Medium Term Expenditure Framework (MTEF) published earlier in November projects general government debt to grow to 44.2% in 2019, while it was forecast to decline to 37.7% in the previous MTEF.
“The government also foresees a reduction in the general government deficit to 2.9% in 2019, up from a previous target of 1%. It plans to achieve this improvement by cutting operational costs, stabilising capital spending in nominal terms, and freezing the wage bill by reducing the number of civil servants by 2% per year through natural attrition.”
STAFF REPORTER
According to the ratings agency, the downgrade reflects weaker-than-forecast fiscal outcomes and the government debt-to-GDP ratio will continue to increase in the short term.
The country's economic recovery has been weaker than expected.
“This will leave debt in financial year 2019/20 at nearly double the ratio in 2014/15. The downgrade also reflects a weaker-than-expected economic recovery and our view that medium-term growth has shifted to a lower gear,” the agency stated.
Fitch noted that fiscal consolidation was temporarily interrupted in the current financial year.
“We forecast the general government deficit to narrow to 6% of GDP from 6.9% in 2016, against a revised government target of 5.3%.
However, this improvement is due solely to a one-off surge in transfers from the South African Customs Union (SACU) which we expect to lead to a downward adjustment in the receipts for 2019.
“The initially projected reduction in aggregate public capital spending will not materialise due to a N$2.5 billion capital injection in a new public infrastructure fund and to the settlement of previously unreported arrears worth N$2.7 billion arising from commitments undertaken in 2016.
“Total-spending-to-GDP will stabilise as lower non-wage current outlays will offset the rise in the payroll, interest costs and public investment.”
The government has revised its fiscal consolidation strategy, and no longer targets a reduction or stabilisation of debt-to-GDP, the ratings agency said.
“The latest Medium Term Expenditure Framework (MTEF) published earlier in November projects general government debt to grow to 44.2% in 2019, while it was forecast to decline to 37.7% in the previous MTEF.
“The government also foresees a reduction in the general government deficit to 2.9% in 2019, up from a previous target of 1%. It plans to achieve this improvement by cutting operational costs, stabilising capital spending in nominal terms, and freezing the wage bill by reducing the number of civil servants by 2% per year through natural attrition.”
STAFF REPORTER
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