Namibia’s total debt stock currently stands at N$125 824 705 809. Of that amount, 26% is foreign debt while 74% is domestic debt. These astronomical debt figures were confirmed in the National Assembly last week by deputy finance minister Maureen Hinda-Mbuende. Responding to questions from the House, Hinda-Mbuende said all loan agreements between the People’s Republic of China and Namibia account for some N$2.1 billion.
“The record shows that borrowing from China consists of the minimal value of 1% of the Gross Domestic Product, and less than 2% of the whole debt portfolio. At this level, it poses no risk of fear for Namibia to fall into a debt trap. The debt service towards Chinese loan, including debt repayment, amounts to about N$65 million or 9% of the total debt service,” explained the deputy minister.
The 26% of foreign debt is made up of a loan from the Federal Republic of Germany, which is 2%, People’s Republic of China is 1%, Export Import Bank of China is 5%, the African Development Bank has 33%, other lenders make up 2%, while the International Monetary Fund is 13%.
The deputy minister said the government is confident the country has never defaulted on any of its debt obligations. Te government has devised a sustainable debt servicing and debt redemption strategy, which outlines measures to be undertaken in preparation for the serving of its debt portfolio. The strategy aims to ensure prudent and credit risk management to avoid default events.
She noted that borrowing from development partners is driven by the need to fund the country’s development agenda, aimed at fostering the social and economic development needs of Namibia. Hinda-Mbuende said government is in support of any cheap borrowing associated with generous terms and conditions.
She was making specific reference to concessional loans received from the People’s Republic of China to Namibia.
“Concessional loans in this case are loans received to fund projects based on the framework agreements reached by the two governments, where the Namibian government requests China to extend funding to its development projects. This is done in order for the Namibian government to achieve its developmental goals as set out in the national development plans and the Harambee Prosperity Plan,” she stated.
The deputy minister said these concessional loans are provided within a political relationship between the two governments and contains significant generous terms and conditions, as opposed to instruments issued in the domestic market.
The concessional loans are achieved either through longer repayment periods, lower interest rates far below the market rate, longer grace periods to allow sufficient time to implement the project, as well as lower management and commitment fees.
Hinda-Mbuende further noted that the terms of concessional loans are at a 2% interest, 0.25% commitment fees on the undisbursed balance of the loan, 0.25% management fees, a five-year grace period before repayment of the principal loan starts, and a 25- year repayment period or more.
Namibian projects that benefited from the Chinese loans are the Omakange-Ruacana road (about 60km), the Engela-Outapi road (about 90km), security scanners at all borders, and an electronic document management system at the Office of the Prime Minister.
Through the mutual relationships between the two governments, Namibia has been a recipient of grants from China for a number of developmental projects.
In the National Assembly, Popular Democratic Movement parliamentarian Elma Dienda expressed concern with guarantees Namibia made to China. She cautioned that the loans could be a burden to future generations if Namibia fails to implement appropriate mechanisms.