Namibia registered a surplus on the current account during the second quarter of 2020, mainly due to a merchandise trade surplus and an increase in secondary income inflows. The current account recorded a surplus of N$5.1 billion, which is a turnaround from a deficit of N$1.9 billion at the same time last year.
According to the Bank of Namibia’s quarterly bulletin, the surplus was attributed to the merchandise trade balance that reflected a significant decline in import payments and an increase in export earnings coupled with the higher Southern African Customs Union (Sacu) earnings.
Emma Haiyambo, the central bank’s Director of Strategic Communications and Financial Sector Development, stated that the financial account balance registered net lending to the rest of the world, mainly supported by outflows observed in other investment and foreign reserves.
She said the stock of international reserves stood at N$31.8 billion, representing an import cover of 6.5 months at the end of the second quarter of 2020.
“At the end of the second quarter of 2020, Namibia’s international investment position recorded an increased net asset position of N$6.9 billion compared to a net liability position of N$11.1 billion a year ago. The Namibia Dollar weakened against all major trading currencies over the year to the second quarter of 2020 on the back of growing concerns over the impact of Covid-19,” she stated.
On the fiscal front, the report revealed that the central government’s budget deficit is estimated to widen considerably during the fiscal year 2020/21. The central government’s total debt as a percentage of GDP stood at 58.7% at the end of June 2020, from 49.2% a year earlier.
The report further stated that total loan guarantees as a ratio of Gross Domestic Product (GDP), however, it declined due to repayments of loans that were guaranteed by the government for the development finance institutions during the period under review. Going forward, the central government budget deficit in the fiscal year 2020/21 is estimated to rise to 12.4% of GDP, much higher compared to the previous fiscal year.
“The increase is expected to be on account of government’s effort to cushion the effect of the Covid-19 pandemic on economic activity as well as to help save lives and to support the livelihood through the provision of social grants and the procurement of various health materials and equipment. In that regard, the central government debt is estimated to rise to 68.7% of GDP during the FY2020/21,” reads the report. Moreover, activities in the domestic economy slowed during the second quarter of 2020 compared to the corresponding quarter of the previous year. The declines were particularly reflected in the tourism, transport, manufacturing, wholesale and retail trade, and mining sectors and were mainly attributed to Covid-19 pandemic-induced effects.
The report further stated that livestock marketing activity declined as a result of farmers restocking their herds owing to good rain received during the year: “Very weak activity were reflected in the collapse in arrivals in the tourism sector and lower cargo volumes in the transport sector.