Junk here to stay
Junk here to stay

Junk here to stay

Fitch says Namibia’s rating is weighed down by weak medium-term growth prospects and wide budget and external deficits relative to rating peers.
Jo-Mare Duddy Booysen
Jo-Maré Duddy – Namibia’s creditworthiness is likely to remain junk for the foreseeable future, analysts have said in reaction to Fitch Ratings’ affirming the country’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at BB+.

“The outlook for improved credit ratings is definitely not on the near-term horizon,” commented Dylan van Wyk, senior analyst at Cirrus Capital, on Fitch’s announcement on Monday.

Eloise du Plessis, research head at PSG Namibia, said: “We expect that a positive rating action from either Fitch or Moody’s [where Namibia also has junk status] is unlikely in the coming 12 months and that risks to the sovereign credit rating are skewed to the downside.”

Klaus Schade, research associate at the Economic Association of Namibia (EAN), said there are “no quick-fix solutions and it usually takes countries a couple of years to regain an investment grade”.

Fitch said Namibia’s rating is “weighed down by weak medium-term growth prospects and wide budget and external deficits relative to rating peers”. The international credit rating agency is not convinced that drastic expenditure cuts will alleviate government’s debt problem. “The fiscal consolidation measures set forth by the government will not be sufficient to achieve the official goal of stabilising and eventually reducing public debt/GDP, in Fitch's view.”

This is the most important sentence in Fitch’s latest report, Van Wyk said. “Although Fitch has recognised the efforts made towards fiscal consolidation their report, they certainly feel that more measures should be put in place. Furthermore, Fitch also recognises that fiscal consolidation will be a long and arduous process,” he said.

Budget documents tabled by finance minister Calle Schlettwein in March targets a debt-to-GDP ratio of 46% in 2019/20. Fitch forecasts it will rise to 51% of gross domestic product – up from 43% in 2016/17 and 2017/18.

Growth

Fitch believes the economy will only recover “modestly” this year. Where the agency expected growth of 2%, it now forecast 0.6% in 2018. This is due to a deeper than expected contraction in domestic demand in 2017, renewed delays in the ramping-up of the Husab uranium mega-mine production to full capacity and low rainfall at the start of the current season, Fitch says.

“The economy's susceptibility to external risks and weather hazards is compounded by the lack of fiscal space to cushion exogenous shocks while monetary policy is constrained by the exchange rate peg. Moreover, medium-term growth prospects are constrained by structural bottlenecks, including low education outcomes and a business climate that is somewhat weaker than rating peers,” Fitch continues.

“Against this backdrop, fiscal consolidation is advancing only slowly as the government strives to protect economic growth amid pressures to tackle high inequality and unemployment,” the agency says.

Fitch says short-term refinancing risks are moderate. However, it could intensify from 2020 should the budget deficit remain wide, as substantial amounts of market debt reach maturity.

“Nearly two-thirds of public debt is held domestically by a captive investor base and liquidity has been bolstered by the rise in the regulatory domestic asset requirement for institutional investors from 35% to 45% of total assets. Rollover risks arise from the upsurge in the stock of short-term treasury bills at 12% of GDP in June 2018, double its level five years earlier, reflecting a low market appetite for long-term government notes,” Fitch says.

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Namibian Sun 2024-03-28

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Katima Mulilo: 19° | 37° Rundu: 17° | 33° Eenhana: 18° | 33° Oshakati: 20° | 31° Ruacana: 19° | 33° Tsumeb: 17° | 29° Otjiwarongo: 16° | 28° Omaruru: 18° | 31° Windhoek: 17° | 28° Gobabis: 17° | 28° Henties Bay: 16° | 19° Wind speed: 24km/h, Wind direction: S, Low tide: 10:54, High tide: 04:57, Low Tide: 22:58, High tide: 17:16 Swakopmund: 15° | 17° Wind speed: 29km/h, Wind direction: SW, Low tide: 10:52, High tide: 04:55, Low Tide: 22:56, High tide: 17:14 Walvis Bay: 16° | 22° Wind speed: 33km/h, Wind direction: SW, Low tide: 10:52, High tide: 04:54, Low Tide: 22:56, High tide: 17:13 Rehoboth: 18° | 29° Mariental: 22° | 32° Keetmanshoop: 21° | 34° Aranos: 21° | 31° Lüderitz: 15° | 29° Ariamsvlei: 23° | 34° Oranjemund: 15° | 21° Luanda: 27° | 30° Gaborone: 20° | 32° Lubumbashi: 17° | 24° Mbabane: 15° | 23° Maseru: 12° | 28° Antananarivo: 16° | 27° Lilongwe: 17° | 29° Maputo: 20° | 28° Windhoek: 17° | 28° Cape Town: 17° | 23° Durban: 21° | 25° Johannesburg: 18° | 28° Dar es Salaam: 26° | 32° Lusaka: 18° | 30° Harare: 15° | 31° Currency: GBP to NAD 23.87 | EUR to NAD 20.45 | CNY to NAD 2.62 | USD to NAD 18.95 | DZD to NAD 0.14 | AOA to NAD 0.02 | BWP to NAD 1.33 | EGP to NAD 0.39 | KES to NAD 0.14 | NGN to NAD 0.01 | ZMW to NAD 0.74 | ZWL to NAD 0.04 | BRL to NAD 3.8 | RUB to NAD 0.2 | INR to NAD 0.23 | USD to DZD 134.3 | USD to AOA 832.63 | USD to BWP 13.71 | USD to EGP 47.35 | USD to KES 130.98 | USD to NGN 1415.13 | USD to ZAR 18.96 | USD to ZMW 24.77 | USD to ZWL 321 | Stock Exchange: JSE All Share Index 73909.5 Up +0.41% | Namibian Stock Exchange (NSX) Overall Index 1516.02 Down -0.13% | Casablanca Stock Exchange (CSE) MASI 12981.98 Up +0.34% | Egyptian Exchange (EGX) 30 Index 28224.37 Down -2.87% | Botswana Stock Exchange (BSE) DCI Same 0 | NSX: MTC 7.75 SAME | Anirep 8.99 SAME | Capricorn Investment group 17.34 SAME | FirstRand Namibia Ltd 49 DOWN 0.50% | Letshego Holdings (Namibia) Ltd 4.1 UP 2.50% | Namibia Asset Management Ltd 0.7 SAME | Namibia Breweries Ltd 31.49 UP 0.03% | Nictus Holdings - Nam 2.22 SAME | Oryx Properties Ltd 12.1 UP 1.70% | Paratus Namibia Holdings 11.99 SAME | SBN Holdings 8.45 SAME | Trustco Group Holdings Ltd 0.48 SAME | B2Gold Corporation 47.34 DOWN 1.50% | Local Index closed 677.62 UP 0.12% | Overall Index closed 1534.6 DOWN 0.05% | Osino Resources Corp 19.47 DOWN 2.41% | Commodities: Gold US$ 2 213.91/OZ UP +1.06% | Copper US$ 3.98/lb UP +0.02% | Zinc US$ 2 456.10/T DOWN -0.02% | Brent Crude Oil US$ 87.14/BBP UP +0.87% | Platinum US$ 908.98/OZ UP +1.58% Sport results: Weather: Katima Mulilo: 19° | 37° Rundu: 17° | 33° Eenhana: 18° | 33° Oshakati: 20° | 31° Ruacana: 19° | 33° Tsumeb: 17° | 29° Otjiwarongo: 16° | 28° Omaruru: 18° | 31° Windhoek: 17° | 28° Gobabis: 17° | 28° Henties Bay: 16° | 19° Wind speed: 24km/h, Wind direction: S, Low tide: 10:54, High tide: 04:57, Low Tide: 22:58, High tide: 17:16 Swakopmund: 15° | 17° Wind speed: 29km/h, Wind direction: SW, Low tide: 10:52, High tide: 04:55, Low Tide: 22:56, High tide: 17:14 Walvis Bay: 16° | 22° Wind speed: 33km/h, Wind direction: SW, Low tide: 10:52, High tide: 04:54, Low Tide: 22:56, High tide: 17:13 Rehoboth: 18° | 29° Mariental: 22° | 32° Keetmanshoop: 21° | 34° Aranos: 21° | 31° Lüderitz: 15° | 29° Ariamsvlei: 23° | 34° Oranjemund: 15° | 21° Luanda: 27° | 30° Gaborone: 20° | 32° Lubumbashi: 17° | 24° Mbabane: 15° | 23° Maseru: 12° | 28° Antananarivo: 16° | 27° Lilongwe: 17° | 29° Maputo: 20° | 28° Windhoek: 17° | 28° Cape Town: 17° | 23° Durban: 21° | 25° Johannesburg: 18° | 28° Dar es Salaam: 26° | 32° Lusaka: 18° | 30° Harare: 15° | 31° Economic Indicators: Currency: GBP to NAD 23.87 | EUR to NAD 20.45 | CNY to NAD 2.62 | USD to NAD 18.95 | DZD to NAD 0.14 | AOA to NAD 0.02 | BWP to NAD 1.33 | EGP to NAD 0.39 | KES to NAD 0.14 | NGN to NAD 0.01 | ZMW to NAD 0.74 | ZWL to NAD 0.04 | BRL to NAD 3.8 | RUB to NAD 0.2 | INR to NAD 0.23 | USD to DZD 134.3 | USD to AOA 832.63 | USD to BWP 13.71 | USD to EGP 47.35 | USD to KES 130.98 | USD to NGN 1415.13 | USD to ZAR 18.96 | USD to ZMW 24.77 | USD to ZWL 321 | Stock Exchange: JSE All Share Index 73909.5 Up +0.41% | Namibian Stock Exchange (NSX) Overall Index 1516.02 Down -0.13% | Casablanca Stock Exchange (CSE) MASI 12981.98 Up +0.34% | Egyptian Exchange (EGX) 30 Index 28224.37 Down -2.87% | Botswana Stock Exchange (BSE) DCI Same 0 | NSX: MTC 7.75 SAME | Anirep 8.99 SAME | Capricorn Investment group 17.34 SAME | FirstRand Namibia Ltd 49 DOWN 0.50% | Letshego Holdings (Namibia) Ltd 4.1 UP 2.50% | Namibia Asset Management Ltd 0.7 SAME | Namibia Breweries Ltd 31.49 UP 0.03% | Nictus Holdings - Nam 2.22 SAME | Oryx Properties Ltd 12.1 UP 1.70% | Paratus Namibia Holdings 11.99 SAME | SBN Holdings 8.45 SAME | Trustco Group Holdings Ltd 0.48 SAME | B2Gold Corporation 47.34 DOWN 1.50% | Local Index closed 677.62 UP 0.12% | Overall Index closed 1534.6 DOWN 0.05% | Osino Resources Corp 19.47 DOWN 2.41% | Commodities: Gold US$ 2 213.91/OZ UP +1.06% | Copper US$ 3.98/lb UP +0.02% | Zinc US$ 2 456.10/T DOWN -0.02% | Brent Crude Oil US$ 87.14/BBP UP +0.87% | Platinum US$ 908.98/OZ UP +1.58%