Moody's downgrade slammed
The Friday downgrade by Moody's of government's international debt issuances to junk status has been lambasted by finance minister Calle Schlettwein, saying there was no thorough assessment made.
Finance minister Calle Schlettwein said the Moody's Investors Service Friday downgrade of the Namibian government's debt rating was highly regrettable as there was no thorough assessment done on the situation on the ground.
“For this recent rating 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,” the minister said.
Moody's 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.
According to Schlettwein, “A thorough assessment taking all factors into consideration would have been the proper way in dealing with reviewing Namibia's sovereign credit rating.
“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's decides to downgrade our credit ratings.”
He concluded by saying that the government summons the collective support of all Namibians and calls on the private sector and investor community to remain positive and supportive during the adjustment process.
“The government recognises that fiscal consolidation takes time to achieve its intended objectives and that implementation of such a policy should avoid the risks of reversal in the development indices, given our unique circumstances.” The corrective policy response, Schlettwein said, had yielded positive results including curtailing growth in spending, reducing the budget deficit over the past two years and diversifying infrastructure finance options, among others.
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“For this recent rating 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,” the minister said.
Moody's 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.
According to Schlettwein, “A thorough assessment taking all factors into consideration would have been the proper way in dealing with reviewing Namibia's sovereign credit rating.
“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's decides to downgrade our credit ratings.”
He concluded by saying that the government summons the collective support of all Namibians and calls on the private sector and investor community to remain positive and supportive during the adjustment process.
“The government recognises that fiscal consolidation takes time to achieve its intended objectives and that implementation of such a policy should avoid the risks of reversal in the development indices, given our unique circumstances.” The corrective policy response, Schlettwein said, had yielded positive results including curtailing growth in spending, reducing the budget deficit over the past two years and diversifying infrastructure finance options, among others.
STAFF REPORTER
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