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Home / Namibia to use N$3 billion AfDB loan to finance budget deficit
Namibia to use N$3 billion AfDB loan to finance budget deficit
2018-07-23Staff Report 2 Staff Reporter WINDHOEK - The African Development Bank (AfDB) has approved the second tranche budget support loan of N$3 billion for Namibia. The total loan package consists of N$10 billion of which N$6 billion is budget support (2017/18 and 2018/19) and N$4 billion project financing over a five-year period. Government applied for the loan at the beginning of 2017. Responding to questions on social media regarding the announcement of the loan, finance minister Calle Schlettwein confirmed that it is a ZAR-denominated loan at more favourable terms than most comparable long-term debt instruments and comes with a five-year grace period. “Disbursement is expected during this quarter and will provide part of the deficit financing as per the 2018/19 budget … The budget as approved has a deficit of 4.5 percent. 95.5 percent of the budget is financed by our own revenue (taxes and other income to the state). This loan funds part of the deficit,” Schlettwein explained. He added that because it is a ZAR-denominated loan, the arrangement ensures that Namibia will not be exposed to currency fluctuations that often make foreign currency loans more expensive to repay. Another attractive feature of the loan is the five-year grace period, which would come in handy should Namibia not be able to keep up with the repayment schedule. Government, through the Ministry of Finance, has already received half of the N$10 billion loan of which N$3 billion was used to fund last year’s budget deficit and N$2 billion was utilised for educational and agricultural development projects. According to the AfDB, the loan facility is the second of a two-year programmatic series and will support the budget for the fiscal year 2018/19. “It aims at strengthening public financial management and improving the quality and efficiency of public sector spending,” said the AfDB in a statement. “The programme builds on phase one approved last year, which has achieved positive results. These include the reduction of the budget deficit from 8.2 percent of gross domestic product in 2015/16 to 5.4 percent in 2017/18 … It has also helped to improve the country’s liquidity situation at a time when domestic market liquidity was low, occasioned by constrained cash flow; and funding to retire pending invoices in critical ministries, including education and health, which helped to avoid a looming crisis of a private credit crunch,” reads the AfDB statement. 2018-07-23Staff Report 2
