The Bank of Namibia says the country’s stock of international reserves grew by 2.9% to N$59.3 billion at the end of August 2024, compared to N$57.6 billion at the end of June.
The increase in reserves signals a positive shift in the country’s balance of payments, providing approximately 3.8 months’ worth of import cover for goods and services, or 4.6 months when excluding oil and gas-related imports, which are financed externally.
“Additionally, the International Investment Position (IIP) registered a lower net asset position at the end of the second quarter of 2024, compared to the corresponding quarter of the previous year due to higher gross foreign liabilities recorded,” the central bank’s quarterly bulletin read.
The increase in reserves comes despite a challenging external sector. During the second quarter of 2024, Namibia’s current account deficit widened significantly by N$5.4 billion to N$8.6 billion, representing 14.5% of quarterly GDP.
The deterioration was largely driven by a growing merchandise trade deficit and higher net outflows in the services account, particularly due to payments for oil and gas exploration.
The merchandise trade deficit worsened as imports rose faster than exports during the quarter.
Despite these setbacks, the external current account deficit was offset by non-reserve-related inflows in the financial account, amounting to N$13.1 billion.
The inflows, primarily from foreign direct and other investments, resulted in a balance of payments surplus of N$3.9 billion before reserve action, contributing to the accumulation of foreign reserves.
“On the external sector front, the external current account deficit deteriorated on an annual basis, due to a higher merchandise trade deficit and increased net outflows of the services account, whereas the stock of international reserves increased over the same period,” the report read.
The report also says that the government demonstrated improved debt management. The central government’s debt stock as a percentage of GDP declined to 61.3% by June 2024, down from 62.4% a year earlier, supported by faster nominal GDP growth.
In nominal terms, however, central government debt rose by 8.3% to N$157.6 billion, largely due to the issuance of Treasury Bills and Internal Registered Stock, as well as external borrowing to finance the fiscal deficit.
External debt increased due to loans from the KFW Development Bank and the African Development Bank (AfDB).
Loan guarantees as a percentage of GDP also decreased slightly to 3.3%, down from 3.8% a year earlier, mainly due to repayments of domestic loans in the agricultural and transport sectors.
Additionally, a reduction in foreign loans guaranteed for communication and transport institutions contributed to the decline.
“The higher net outflows on the services account were attributable to payments for services related to oil and gas exploration and appraisal activities, while the widening of the merchandise trade deficit was ascribed to a faster rise in the import bill relative to exports during the quarter under review,” the bulletin read.
