Bank of Namibia’s Deputy Director for Financial Sector Development Emma Haiyambo tells Managing Editor Toivo Ndjebela that there is no need to press fear buttons over the country’s debt, but rang out caution about the need to contain the current surge.
What was the cause of both domestic and foreign debt during the period under review?
The change in foreign debt was mainly due to the exchange rate and the Euro bond issuance. The change in debt was due to the new borrowings in line with the country’s borrowing plan.
To whom do we mostly owe the debt?
In terms of government debt, by the end of the last quarter of 2015/16 about 46 percent of the debts were owed to our foreign investors, while the remaining 54 percent are to domestic investors. In terms of private sector credit extended by lending institutions, about 41 percent are to businesses (corporates), while about 59 percent are to individuals in the form of instalment credit, mortgage, overdraft and others.
Kindly confirm and elaborate if this debt is manageable and if it is within the accepted threshold.
This question does not clearly specify whether it is referring to government or private debt. Despite that government debt is above the set ceiling of 35 percent of GDP, it remains well below the median (average) of 40 percent for Namibia’s sovereign rating peer group of BBB-. Private debt, while having generally showed an increasing trend over the year, has also remained manageable so far.
In general, what are the implications of owing this much?
In general, borrowing money is not a problem. Borrowing only becomes a problem when it is difficult to service the debt. Namibia has thus far, not experienced a situation where it is not in a position to service its debts. However, in terms of government debt, the implication of high debt is that more will be spent on debt servicing when it could be channelled to other pressing development priorities of the country. If a country is unable to pay its debt, it defaults and this could cause a panic in the domestic and international markets.
What is the ideal way of ensuring that we do not increase, astronomically, the debts going forward and that we pay back what we owe?
A very common way to ensure that we do not increase what we owe is by working on avenues to increase our income. Borrowing usually comes in when we have to finance a deficit (be it government deficit, household/personal or corporates), because our income is less than our expenditure.