Asignificant portion of Namibia’s debt portfolio is due during the next three years. This implies the country faces a refinancing risk for the current maturity profile of both the domestic and external portfolios, which needs to be managed prudently. Refinancing risk refers to the possibility that an individual or company won’t be able to replace a debt obligation with suitable new debt at a critical point.
According to the national fiscal strategy for the medium-term expenditure framework FY2024/25 to FY2026/27, the most significant exposure stems from the US$750 million (about N$14.3 billion) Eurobond maturing on 29 October 2025.
Namibia’s public debt stock is estimated at N$165.8 billion, or 60.1% of gross domestic product (GDP) during FY2024/25. This represents a reduction from an estimated 62.5% of GDP at the end of the preceding financial year.
“The size and composition of the public debt is a source of fiscal risk. Public debt rose significantly in previous years, increasing to an estimated N$154.2 billion, representing 62.5% of GDP at the end of FY2023/24. While the medium-term fiscal framework maintains public debt on a slowing path, the level of debt remains high, relative to Namibia’s peer economies,” reads the fiscal strategy document.
Furthermore, potential economic shocks and any materialisation of adverse risks could compromise the achievement of the envisaged debt growth trajectory.
“A significant portion of the government debt portfolio is due for repayment over the MTEF. The largest among these maturities is the US$750 million Eurobond due on 29 October 2025. This is the largest single-day debt maturity in the history of our country. In this regard, we are committed to redirect part of the increase in revenues towards the sinking fund to manage the roll-over risk and contain increases in future debt service obligations,” stated finance minister Iipumbu Shiimi last week when delivering his budget statement.
This, he said, will ensure Namibia minimises a potentially significant future drain on resources which are desperately needed for infrastructure development, poverty reduction and combating climate change, amongst others.
According to economists, the country’s enormous public debt will remain a key worry in the medium-term.
A statement issued by the International Monetary Fund (IMF) said Namibia should continue to address its existing difficulties of high public debt and low non-resource sector development. The IMF claimed fiscal consolidation would help lower governmental debt, while also making room for private sector growth.
Moreover, local economist Theo Klein, who was employed at a local stock brokerage last year, stated that Namibia was borrowing a sizeable amount equating to N$29 million daily, including weekends, for the last 12 years. In 2010, Namibia’s public debt stood at around N$11 billion. This debt stock is expected to increase to N$138.4 billion, equivalent to 69.6% of gross domestic product (GDP) in the 2022/23 financial year.
Local economist Omu Kakujaha commented: “There is only one way to pay off your debt and stay out of debt: you must make enough money to fund your spending. Namibia should hence utilise the low-hanging fruits to expand economic growth and consequently expand the tax base. With an expanded tax base and increased revenue, Namibia can fund its developmental objectives without the need for heavy borrowing. That will reduce your debt-to-GDP and debt servicing cost”.
Meanwhile, responding to the recently- tabled budget for the 2024 to 2025 financial year, secretary general of the Trade Union Congress of Namibia (Tucna) Mahongora Kavihuha said Namibia must borrow for investment.
“We have further noticed from the budget that the debt stock is still a thorn in the flesh, and something has to be done as we must not continue to borrow for the purpose of consumption,” said Kavihuha.
He noted that the budget should have adopted a pro-employment approach, and that the debt handling and management aspects should be more transparent.