Windhoek
According to the latest Money and Banking Statistics released by the Bank of Namibia at the end of July, total Namibian debt, comprising of domestic and foreign government, corporate and household debt, grew significantly by 30.6 percent year-on-year (y-o-y) compared to a growth rate of 16.1 percent recorded the previous year.
This brought total debt to N$143.6 billion at the end of June 2016, compared to N$109.9 billion recorded the previous year.
Private sector debt also rose by 12.1 percent y-o-y compared to 11.1 percent y-o-y recorded during May 2016. Local stock brokerage firm Simonis Storm Securities (SSS) pointed out in a recent report that this increase is still at a slower pace compared to a 14.7 percent y-o-y recorded the previous year. SSS noted that the growth in Private Sector Credit Extension (PSCE) was mainly driven by growth in business debt, while total domestic debt grew by 31.3 percent y-o-y.
“On a monthly basis total debt contracted by 0.6 percent compared to a positive growth of 2.2 percent in the prior month. The contraction in total debt can be attributed to a monthly contraction in government debt by 2.9 percent compared to a 5.0 percent recorded in the prior month as a result of a stronger Rand, which has reduced the inflationary growth in foreign debt,” the firm said.
SSS further pointed out that government remains the biggest contributor to increasing total debt levels. The 49.7 percent month-on-month (m-o-m) spike in government debt during September 2015 resulted from the issuance of the two Johannesburg Stock Exchange (JSE) bonds, worth N$750 million, the firm said.
Annually, government debt grew by 66.6 percent in June compared to 18.9 percent recorded in the prior year. Corporate and household debt grew gradually by 12.7 percent y-o-y and 11.7 percent y-o-y, respectively,” SSS further noted.
“The sharp increase in overdrafts is mainly prompted by a high demand for credit by individuals of 11.3 percent m-o-m compared to -0.1 percent in the prior month. Furthermore, monthly growth in installment credit during June 2016 was driven by businesses.
“This is evident in the number of medium to extra heavy commercial vehicles (mainly used for business purposes) that increased by 49 percent m-o-m to 76 units during June 2016. New legislation relating to credit on movable goods will put pressure on instalment credit going forward, as there are now limits stipulated on the duration and minimum deposits,” the report stated.
SSS estimates that total debt as a percent of Gross Domestic Product (GDP) stood at 38.5 percent in June, which is above the fiscal target of 35 percent. Domestic debt amounted to N$33.8 billion in June, which represents 21 percent of GDP. Domestic debt instruments also grew by 2.1 percent m-o-m during June, compared to 1.4 percent the prior month.
Meanwhile, the growth in debt instruments was mainly driven by the increase in the demand for short-term bonds (TBs). TBs grew by 2.8 percent m-o-m to N$13.4 billion in June compared to 1.5 percent in May. Also, SSS noted that the longer term bonds grew by 1.3 percent m-o-m and by 36.2 percent y-o-y to N$19.3 billion during June.
“Going forward, the weaker demand in medium term bonds is likely to reduce the growth in domestic debt, however this may be offset by demand in TBs,” SSS argued.