Government blasts junk status downgrade

Moody's Investors Service yesterday downgraded the government of Namibia's debt rating to Ba1 from Baa3-, while maintaining a negative outlook. The agency attributed the downgrade to the erosion of the country’s fiscal strength due to sizeable imbalances and an increasing debt burden. The limited institutional capacity to manage shocks and address long-term structural fiscal rigidities was also noted as a factor, while the risk of renewed government liquidity pressures in the coming years also led to the downgrade. “Despite the weakening of its creditworthiness, the country's key credit metrics in the economic, fiscal and external spheres are currently well aligned with those of Ba1-rated peers. The rating is also supported by the country's strong growth prospects in the coming years. However, the maintenance of the negative outlook following the downgrade of the rating to Ba1 reflects the risk that the erosion in key fiscal and debt metrics could be more pronounced than currently anticipated, giving rise to significant funding challenges,” Moody’s stated. Finance Minister Calle Schlettwein said the downgrade was highly regrettable as there was no thorough assessment done on the situation on the ground. “This recent rating acting by Moody’s relied merely on an exchange of emails on a single item, that of outstanding invoices and how government is planning to settle them. This is highly regrettable. A thorough assessment taking all factors into consideration would have been the proper way in dealing with reviewing Namibia’s sovereign credit rating,” said Schlettwein. “The process followed by Moody’s is, therefore, not systematic as we are busy developing the mid-year budget review and better informed ratings action and effective country assessment could have benefited from the mid-year budget review planned for October 2017.” He said the rating agency ignored positive developments reported within the country such as the level of foreign exchange reserves that increased to 5.3 months of import cover during the second quarter 2017. “This is a crucial variable in credit worthiness that cannot be ignored. It is puzzling that at a time when Namibia’s import coverage has increased, Moody decides to downgrade our credit ratings.”

STAFF REPORTER