Deputy finance minister Maureen Hinda-Mbuende has assured the nation that the newly-created Sovereign Wealth Fund, known as the Welwitschia Fund, was created as an important revenue source to ensure Namibian resources benefit future generations.
“More importantly, the fund is to ensure that the proceeds from non-renewable resources are saved and meaningfully invested for the benefit of our future generations,” she said last week during the release of the Bank of Namibia’s 2021 annual report and corporate identity.
Hinda-Mbuende stressed that the establishment of this fund is prioritised through the Harambee Prosperity Plan II (HPPII) and approved by Cabinet. The Sovereign Wealth Fund is anticipated to be launched at a future date. According to the deputy minister, the Welwitschia Fund will, therefore, lead the way in facilitating long-term, inclusive and sustainable development.
At the same occasion, the central bank declared a dividend amounting to N$413.7 million to the State.
“These dividends make a significant difference, and are utilised optimally in critical areas of need. I confirm that a portion of this dividend will be used as seed capital for the Sovereign Wealth Fund, as agreed to between the ministry and the central bank board,” Hinda-Mbuende stated.
BoN governor Johannes !Gawaxab said despite the low interest rate environment that persisted in 2021, the bank recorded a higher surplus than in 2020 due to capital gains realised from foreign reserve assets and cost containment measures implemented by the bank. Thus, it declared a record-high dividend of N$413.7 million to government, compared to N$278.2 million in 2020.
The governor added that the fact that the dividend will serve as seed capital for the fund shows the central bank’s meaningful contribution to the achievement of inclusive economic growth and to the reduction of poverty in the country.
According to the just-released annual report, Namibia’s external current account deteriorated in 2021 due to a significant increase in the merchandise trade deficit, and a decrease in secondary income inflows.
“The merchandise trade deficit worsened due to a significant rise in import payments and only marginal growth in export receipts, while lower SACU receipts also contributed to the deterioration of the current account in 2021 to a deficit of 9.1% of GDP, compared to a surplus of 2.8% registered in 2020,” reads the report.
Despite redeeming a US$500 million Eurobond during 2021, Namibia’s stock of foreign exchange reserves increased notably to cover about 6.4 months of the country’s imports at the end of 2021, compared to 5.1 months a year earlier.
The bank stated that international reserves thus remained sufficient to meet the external obligations of the country, and to provide confidence in the domestic economy. The increase in international reserves during 2021 was supported by inflows from the International Monetary Fund (IMF)’s Rapid Financing Instrument and an African Development Bank (AfDB) loan, as well as an allocation of Special Drawing Rights (SDRs) by the IMF later in the year.