Namibia’s debt-to-GDP ratio rose to 65.9% as of the end of December 2022, according to the Bank of Namibia (BoN).
This was above the SADC benchmark of 60% of GDP and represents a 0.5 percentage point increase from the previous year, driven by the disbursement of the AfDB loans in December 2022, exchange rate depreciation, as well as a rise in treasury bills and internal registered stock to finance the central government deficit.
“The increase was driven by a rise in the issuance of both Treasury Bills (TBs) and Internal Registered Stock (IRS), coupled with a rise in external debt due to the disbursement of the AfDB loan in December 2022,” BoN spokesperson Kazembire Zemburuka explained.
Despite the rise in debt, there was a decline in the central government’s total loan guarantees on a yearly basis, dropping to 4.8% of GDP from 5.7% of GDP the previous year, according to the BoN’s March 2023 Quarterly Report.
Zemburuka attributed this decline to repayments of foreign loans guaranteed by the government in the transport sector, as well as the development finance institutions.
Simonis Storm, an economic consultancy firm, projects that Namibia’s total debt will reach N$150.9 billion in the fiscal year 2023/24, representing a 13.6% increase from the current level of about N$132 billion. This projected increase will be driven by domestic debt going forward.
On a positive note, the current account deficit for Namibia registered a smaller deficit during the fourth quarter of 2022 due to lower outflows on the primary income account and higher export earnings.
“Lower outflows on the primary income account were ascribed to lower investment income outflows, while higher export earnings contributed to an improved trade balance. This, in turn, led to a smaller deficit on the current account of 4.7 percent of GDP in the current quarter under review compared to 9.1 percent registered in the corresponding quarter of 2021,” Zemburuka said.
Namibia’s foreign reserves also increased to N$47.6 billion, equivalent to 4.9 months of imports of goods and services, due to foreign asset swap arrangements, the AfDB loan, and revaluation gains from the exchange rate.
However, the country’s external balance sheet recorded a lower net asset position during the fourth quarter of 2022 compared to a year ago, due to a rise in direct and other investment liabilities that rose faster than foreign assets.
Domestic economy activity expanded further during the fourth quarter of 2022, but at a slower pace according to the central bank.
“The contraction in the secondary industries was on the back of a weak performance in the manufacturing sector as well as a deep contraction in the construction sector, which has registered successive declines since the third quarter of 2021, despite the positive performance in local electricity generation,” the BoN spokesperson said.
“Furthermore, slower activity in the tertiary industries was driven by reduced growth in the communication and wholesale and retail trade sectors, notwithstanding improved performances in the tourism and transport sectors. Moreover, in the primary industries, the buoyant production of diamonds during the fourth quarter of 2022 was offset by the dip in production of gold, uranium, and zinc concentrate over the same period.”
Namibia’s rising debt-to-GDP ratio is a concern for economists and investors alike, amid doubts about the country’s ability to service its debt and meet its financial obligations.
