Rédaction Africa Links 24 with Donald Matthys
Published on 2024-03-03 06:00:00
The Namibian government is facing a significant financial challenge as it prepares to repay a Eurobond of US$750 million (N$14.3 billion) that is due in 18 months. This Eurobond, issued in 2011 during the presidency of Hifikepunye Pohamba, was used to fund various projects, including the National Housing Enterprise housing initiative. The repayment of this Eurobond is scheduled for 29 October 2025, which is the largest single-day debt maturity in Namibia’s history.
To address this debt repayment, Finance Minister Iipumbi Shiimi announced during the 2024/25 budget that the government plans to set aside at least N$3.5 billion from Southern African Customs Union (Sacu) receipts in the fiscal year 2024/25, and another N$2 billion in 2025/26 to a sinking fund. This fund aims to ensure that there is enough money to pay off two-thirds of the Eurobond when it matures.
Shiimi also mentioned that Namibia expects to receive N$28 billion from Sacu receipts in the 2024/25 financial year, which will be instrumental in financing the repayment of the Eurobond. The government aims to use these funds to reduce the debt-to-gross domestic product ratio to below 60%, thus lowering interest payments and minimizing the risks associated with exchange rate fluctuations.
Economist Klaus Schade commended the government’s efforts to repay the debt and pointed out that repaying a significant portion of the Eurobond will have positive effects on the country’s economy. However, Schade advised that careful consideration should be given to how the remaining one-third of the bond is refinanced, suggesting that borrowing locally could benefit the domestic financial sector.
IJG research analyst Angelique Bock highlighted how the Eurobond repayment will impact the budget deficit, noting that while the budget deficit is expected to increase in the short term, it will eventually narrow as the Eurobond repayment is a one-time payment. Bock emphasized that this allocation of funds towards debt repayment may affect other areas of government expenditure.
Looking ahead, both Schade and Bock emphasized the importance of exploring different financing options for the remaining Eurobond amount to mitigate risks associated with international borrowing. Schade suggested borrowing from development finance institutions in South African rand to reduce exchange rate fluctuation risks, while Bock underscored the necessity of considering the long-term impact of debt repayment on the budget balance.
In conclusion, the Namibian government is taking proactive steps to manage its debt obligations and ensure financial stability. By strategically planning for the repayment of the Eurobond and exploring various financing options, the government aims to strengthen the country’s economic prospects and mitigate risks associated with debt servicing.
Read the original article on The Namibian
, the government is strategising on how to repay the debt it took on in 2011.Eighteen months before it is due to repay a Eurobond of US$750 million (N$14,3 billion), the government is strategising on how to repay the debt it took on in 2011.){kind=link}