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Government debt-to-GDP ratio rises above ceiling

2021-07-06  Maihapa Ndjavera

Government debt-to-GDP ratio rises above ceiling
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The debt-to-GDP ratio for Namibia continued to rise further above the central government debt ceiling of 35% of gross domestic product as of March 2021. Total debt as a percentage of GDP stood at 62% at the end of March 2021, representing yearly and quarterly increases of 6.3 percentage points and 2.0 percentage points, respectively. 

“Going forward, the total debt stock is anticipated to rise to N$159.3 billion over the medium-term expenditure framework (MTEF) period, which represents 77.3% of GDP,” reads a quarterly bulletin for June 2021 from the central bank.

This, according to the bulletin, includes the loan of N$1.5 billion from the African Development Bank as well as the N$3.9 billion Rapid Financing Instrument (RFI) loan from the International Monetary Fund (IMF), which will be used to support the total funding requirement for the
FY2021/22. The total government debt stock stood at N$110.3 billion at the end of March 2021, representing a yearly and quarterly increase of 9.9% and 3.3%, respectively. The increases on a yearly and quarterly basis were driven by a rise in the issuance of both Treasury Bills (TBs) and Internal Registered Stocks (IRS) to finance the central government budget deficit.  For the period under review, government revenue is estimated to decline by 6.1% to N$52 billion during FY2021/22. This is attributed to the Covid-19 induced reduction in Southern African Customs Union (SACU) receipts, coupled with an anticipated reduction in company taxes, owing to subdued economic activity as a result of the pandemic. 

“SACU receipts and company taxes are expected to decline by 36% and 0.6%, respectively, to N$14.7 billion and N$7.6 billion during the FY2021/22. Over the MTEF period, government revenue is expected to remain sluggish in 2022/23 mainly due to anticipated lower SACU receipts and lustreless economic activity, but it is then expected to recover to N$57.1 billion in FY2023/24,” the central bank added.

Furthermore, on the expenditure side, central government expenditure is estimated to decline by 5.8% to N$68 billion during the FY2021/22. The decline is mainly reflected in the operational budget (excluding interest and other statutory payments), which is estimated to decline to N$53.9 billion during the period under review. This is 5.8% lower than in the previous fiscal year with its pandemic-induced record spending. 

The central bank stated that the decline is attributed to the resumption of the fiscal consolidation programme by government and a move towards alignment of expenditure with expected revenue.

-mndjavera@nepc.com.na


2021-07-06  Maihapa Ndjavera

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