The Bank of Namibia says the domestic government debt increased by 1.44% to N$119 billion in June 2024 compared to N$117.3 billion in May.
This represents an increase of N$1.7 billion month-on-month and in addition, domestic debt rose by 10.18% on a year-on-year basis.
According to Simonis Storm Securities, the domestic debt to GDP ratio is now 51.3%, up by 0.4 percentage points from the previous month.
“With the economy experiencing healthy growth, we believe that the government can manage the country’s debt sustainably. For the first quarter of 2024, GDP growth was reported at 4.7%,” said the firm.
Simonis Storm Securities attributed the increase in domestic debt to higher net issuance of Treasury Bills (TBs) and Internal Registered Stock (IRS).
Treasury Bills rose by 2.2% month-on-month, the IRS by 1.08%, and inflation-linked bonds (ILBs) increased by a moderate 0.9%.
“By the end of June, the IRS had an outstanding debt amount of N$69.94 billion, followed by TBs at N$40.06 billion, and ILBs at N$9.02 billion. Overall, the total net issuance slightly exceeded the N$1.65 billion outlined in the Borrowing Plan by N$30 million, ending at N$1.68 billion,” said the firm.
This increases the likelihood of slight under-allocations on IRS for the upcoming month. However, Simonis Storm Securities said it does not expect a significant deviation from the borrowing plan.
During the month, internal registered stock yields fell across the curve compared to the results of the last primary auction in May, dropping by an average of 52 basis points.
“Spreads also narrowed by 57 basis points, from 399 to 342 basis points. For June’s primary auctions, the GC37 bond attracted the highest number of bids, followed by the GC35 and GC48 bonds. Investor interest was largely seen in the intermediate to long-term segments of the curve,” the report said.
The GC32 has the highest outstanding debt, totalling N$6.65 billion while the GC35 follows closely behind with N$6.29 billion in outstanding debt.
The debt on the GC32 currently exceeds that of the GC30, which is not currently available.
“This suggests that any under-allocations in upcoming auctions will likely involve the GC32. In contrast, the GC24 has the lowest outstanding debt at N$2.08 billion,” says Simonis Storm Securities.
The report noted that since July 2023, the Bank of Namibia has successfully exchanged a total of N$2.15 billion for the GC24 through swap auctions, significantly reducing its outstanding amount.
However, no switch auction for the GC24 was conducted in June.
The first swap auction for the GC25 took place on 5 June, resulting in a successful exchange of N$529 million.
“Among the Internal Registered Stocks on offer, the GC48 holds the lowest debt at N$3.34 billion, followed by the GC28 at N$3.53 billion. These GCs are the most recently introduced and received the highest allocations in June, along with the GC27,” said Simonis Storm Securities.
