Fitch rating left unchanged
Credit rating firm Fitch has left Namibia's credit rating unchanged at BBB-.
Fitch this week affirmed Namibia's long-term and local currency issuer default ratings at BBB- with a negative outlook.
According to Fitch, government's commitment to fiscal consolidation was a welcome sign that it had a record of fiscal stability.
“The BBB- rating reflects Namibia's strong growth potential and record of political stability, balanced by high fiscal and external deficits,” said Fitch.
While it had left the rating unchanged, it was concerned about growth and government's ability to reduce debt.
“The negative outlook reflects uncertainties about the growth outlook and the ability of the government to reverse the rise in debt,” said Fitch.
The rating's agency also said that it expected growth of 2% owing to recoveries in gold and uranium mining as well as the agriculture sector.
“Over the medium term, we expect growth to return to around 5% or higher, similar to the levels seen between 2010 and 2015 levels. The recovery will be supported by an end to drought conditions and associated increase in agricultural output, as well as an expected increase in uranium and gold mining. However, tight fiscal policy and low global commodity prices have put downward pressure on growth and will continue to present downside risks,” said Fitch.
Concerns were also raised by Fitch regarding the level of import cover and the structure of external debt.
“Fitch forecasts Namibia to become a net external debtor by end 2017.
“External vulnerability is somewhat mitigated by the structure of external debt; much of the debt is intercompany, with parent companies funding Namibian mining operations.
“At just above three months of current external payments, foreign reserves are low compared with the 'BBB' median of six months,” it said. FNB Namibia head of research Namene Kalili said that Fitch's concerns were similar to that of FNB's. “Risks to the investment grade rating include government's inability to meet fiscal consolidation targets, low foreign currency reserves, a material increase in borrowing costs, failure to narrow the current account deficit and the deterioration in economic growth,” said Kalili.
He was also of the opinion that Namibia was able to steer clear for junk status considering constrained economic growth and soaring debt.
“We believe that the country has dodged a bullet after public debt, the economic performance and the current account balance all deteriorated since the last review,” he said.
He did not rule out the possibility of a downgrade to junk status. “A downgrade remains possible next year, as reflected in Treasury-bill and bond yields,” said Kalili.
OGONE TLHAGE
According to Fitch, government's commitment to fiscal consolidation was a welcome sign that it had a record of fiscal stability.
“The BBB- rating reflects Namibia's strong growth potential and record of political stability, balanced by high fiscal and external deficits,” said Fitch.
While it had left the rating unchanged, it was concerned about growth and government's ability to reduce debt.
“The negative outlook reflects uncertainties about the growth outlook and the ability of the government to reverse the rise in debt,” said Fitch.
The rating's agency also said that it expected growth of 2% owing to recoveries in gold and uranium mining as well as the agriculture sector.
“Over the medium term, we expect growth to return to around 5% or higher, similar to the levels seen between 2010 and 2015 levels. The recovery will be supported by an end to drought conditions and associated increase in agricultural output, as well as an expected increase in uranium and gold mining. However, tight fiscal policy and low global commodity prices have put downward pressure on growth and will continue to present downside risks,” said Fitch.
Concerns were also raised by Fitch regarding the level of import cover and the structure of external debt.
“Fitch forecasts Namibia to become a net external debtor by end 2017.
“External vulnerability is somewhat mitigated by the structure of external debt; much of the debt is intercompany, with parent companies funding Namibian mining operations.
“At just above three months of current external payments, foreign reserves are low compared with the 'BBB' median of six months,” it said. FNB Namibia head of research Namene Kalili said that Fitch's concerns were similar to that of FNB's. “Risks to the investment grade rating include government's inability to meet fiscal consolidation targets, low foreign currency reserves, a material increase in borrowing costs, failure to narrow the current account deficit and the deterioration in economic growth,” said Kalili.
He was also of the opinion that Namibia was able to steer clear for junk status considering constrained economic growth and soaring debt.
“We believe that the country has dodged a bullet after public debt, the economic performance and the current account balance all deteriorated since the last review,” he said.
He did not rule out the possibility of a downgrade to junk status. “A downgrade remains possible next year, as reflected in Treasury-bill and bond yields,” said Kalili.
OGONE TLHAGE
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