WINDHOEK, 12 AUG. – Namibia’s total debt has steadied at N$158,2 billion at the end of June, reflecting a year-on-year growth of 8,5%, while a month-on-month contraction of 0,3% was experienced.
Meanwhile, foreign reserves hit a record high of N$28,5 billion.
The monthly reduction in overall debt is evident in the corporate and government debt components which experienced -0,2% and -1%) respectively, signifying a phase of continued fiscal consolidation, as the economy slows.
However, Private Sector Credit Extension (PSCE) continues on its descending route, growing by 8,1% in June 2017, after the May increase of 8,5% was short-lived.
Simonis Storm Securities Economist, Frans Uusiku said on the contrary, unsecured lending continues to surprise on the upside, registering year-on-year growth of 12,6% in June 2017 compared to 12,2% (y-o-y) in June 2016.
“If this trend continues, we are worried that it might pose significant risks to the banking sector. Chances of this happening is minimal however, as we expect a 25 basis points cut in the repo rate in the next 12 months, thereby easing the cost of borrowing and thus normalising the ratio between secured and unsecured lending,” Uusiku said.
He said although government debt is at its all-time high of N$70,5b by July 2017, its year-to-date growth of 18,4% is trending below its long-run average of 24,4%.
“This bodes well with the fiscal consolidation course. We thus do not expect government to continue borrowing aggressively or at historic levels, owing in part, to a stronger foreign reserves position (N$28,5b by June 2017) and the risk of a slowing economy, which could increase the risk of debt sustainability,” he said.
In future, it is expect that the foreign reserves will become favourable supported by a stronger Rand, continued quarterly settlement of outstanding amounts by Banco Nacional de Angola until January 2018, and an expected improvement of the trade balance as the mining sector strengthens. –Sharma Mundingi