WINDHOEK – Finance Minister Calle Schlettwein says government remains optimistic that growth prospects will gain traction as the implementation of the adopted measures are scaled-up.
Schlettwein said this despite Moody’s on Friday downgrading the country’s long-term non-rand foreign currency bonds.
The rating agency downgraded Namibia’s long-term non-rand foreign currency bonds from Ba1 sub-investment grade assigned in 2017 with a negative outlook to a Ba2 subinvestment grade with a stable outlook, a notch lower than the previous rating.
In its report, the rating agency highlighted key drivers which weigh on the ratings and the outlook- weakening of economic growth which Moody’s expects to contract by 1.5 percent in 2019, against its initial positive growth expectations, reduced ability to stabilise growth in public debt through cutting back on spending, particularly the inability to reduce the high wage bill costs in a low growth environment.
Also, the rating agency also tinted the negative impact of temporaryfactors such as the severe drought in the agricultural sector and the weak growth in the mining sector, declining national competitiveness relative to global rankings key drivers which weigh on the ratings and the outlook.
Schlettwein said when Moody’s downgraded Namibia to sub-investment grade in 2017, among others the main factors cited for the downgrade were the erosion of Namibia’s fiscal strength due to sizeable
fiscal imbalances, an increasing debt burden and limited institutional capacity to manage shocks and address long-term structural fiscal rigidities Since then, the finance minister said the country has made real progress points to stabilise the macro-fiscal framework.
“Government reiterates its commitment to a growth-friendly fiscal consolidation and the package of structural policy reforms to support domestic economic activity, improve business confidence, policy certainty and bring about recovery of the domestic economy and sustainable public debt management,”
Schlettwein said. He added government’s medium-term policy stance, achieving economic growth,
which is the necessary condition for the reduction of public debt, revenue generation, the creation of jobs and the reduction of poverty and inequality is by far the most important objective over the short to longterm
period. Schlettwein said government, in collaboration with the private sector, has already commenced with the implementation of growth enhancing measures.
He said these measures included the implementation of an increased development budget by 42.2 percent as a lever for supporting domestic economic activity. He said these measures include the implementation of the project financing arrangements with the African Development Bank to the tune of N$4 billion over the next three years for the agricultural mechanisation program, rail and road infrastructure projects
as well as essential public infrastructure projects in the education sector.
Also, he said the procurement of these projects have reached an award stage and poised to inject activity and enhance the productive capacity of the economy. Furthermore, he said other measures
include the implementation of SMEs and youth entrepreneurship financing facilities at the Development Bank of Namibia which were launched in early November 2019 and already became effective on 1 December 2019. The minister said government is confident that these policy packages will place the
economy on a firm positive and sustainable growth trajectory over the medium to long
term period.