Government through the finance ministry assured the nation that the chances of defaulting on the N$3.9 billion budget deficit loan Namibia received last year from the International Monetary Fund are minuscule.
Ministry spokesperson Wilson Shikoto noted IMF did a detailed credit and affordability assessment on the country prior to approving the IMF’s Rapid Financing Instrument (RFI). The assessment includes whether the country is creditworthy and whether it has credible systems and policies in place to manage fiscal risks: “We do not foresee any difficulties in servicing this loan.”
Shikoto reaffirmed that the loan from IMF did not come with any conditionalities. He said the servicing of this loan was incorporated into the customary debt service of the government.
The RFI is designed by IMF as an instrument which provides rapid financial assistance to its member states facing urgent balance of payment needs or economic shocks. It is available to all member states including Namibia, and it is designed for situations “where a full-fledged economic programme is not necessary.
“Debt repayments are deemed appropriated; thus, they receive priority above all government payments thus making it difficult to default on them,” he added.
Shikoto explained the payment was a once off disbursement, and it amortises over a period of five years, saying it will not be repaid as a lump sum but rather through scheduled payments after the grace period has lapsed.
Last year, finance minister Iipumbu Shiimi said the total size of the loan is equivalent to 100% of Namibia’s shareholding in IMF.
According to Shiimi, proceeds of the RFI are expected to enable government to fund budgeted programmes and development projects, particularly the elevated needs in the health sector, but also the developmental programmes to enable the country to cope with the adverse impacts of the pandemic.
He added: “RFI is not a financial programme or a normal loan operation, but rather an emergency funding arrangement to help member states. That is why, at a 1.1% interest rate, it is cheaper for Namibia as an upper middle income country.”