Shiimi evades debt trap
Government has poured cold water over fears it would plunge the country further into debt by borrowing money to finance its new stimulus package.
03 April 2020 | Economics
Finance minister Iipumbu Shiimi has allayed fears the government will have to borrow to finance its N$8 billion stimulus package announced this week to carry the country and its people through the devastating coronavirus outbreak.
Shiimi told Namibian Sun yesterday that the government had “money in the kitty”, referring to its reserves which stands at N$8 billion, and wanted to avoid loans for the time being.
“Part of the money is coming from our savings, which are basically the reserves. So, the Eurobond is going to be repaid towards the end of next year. Our feeling is that we have money in the kitty now, and we are in a crisis right now, looking for money,” he said.
“But running around looking for money when we have money does not make sense. So, we are going to take from that money. That fund has about N$8 billion in it so we can actually deplete it if we need to,” he said.
He added that Namibia's Southern African Customs Union (Sacu) income this year was about N$1.6 billion more than the previous year, which provides Namibia an additional source of revenue.
“What we are trying to avoid is to borrow a lot for this purpose and actually use our own savings and our own revenue. That is the principle we want to follow. We are really trying to avoid in carrying too much debt.
Depending on how the situation unfolds if it doesn't end soon and we must take out a loan when it will be on the basis of limited debt.” A Eurobond is an international financial instrument (loan) issued, and is denominated in a currency not native to the country where it is issued.
By May 2019, Namibia had two of these bonds – a US$500 million and US$750 million one – to mature in 2021 and 2025, respectively, tallying to US$1,25 billion.
Stimulus package hailed
The economic stimulus and relief package announced by Shiimi at State House on Wednesday, ranging from business to households, has been hailed as a great intervention.
“We must applaud government although it still remains to be seen how the measures are implemented,” said labour and economic policy expert Herbert Jauch.
The package is comprised of N$5.9 billion in direct support to businesses, households and cash-flow acceleration payments for services rendered to the government and N$2.3 billion off-balance sheet government liabilities.
To avoid further retrenchments in the hardest-hit sectors, the government will provide a wage subsidy to aid businesses in keeping employees on board in the tourism, travel and aviation and construction sectors.
Details will vary between sectors. Government is setting N$400 million aside for this subsidy.
VAT refunds, suppliers
Government will immediately speed up such repayments to enhance the cash flow of enterprises paying value-added tax, Shiimi said.
The total amount of the refunds to be settled within one week of the implementation of these measures stands about N$3 billion, he said.
Government will immediately speed up such payments to boost the cash flow of its suppliers. This amount stands at about N$800 million.