Debt stock stabilises
The growth in government debt is well below the long-run average of 24.4% according to Simonis Storm.
Stockbrokers Simonis Storm have noted a reduction in the debt undertaken by government following the release of the money and banking statistics by the Bank of Namibia this week.
Looking into the data, economist Frans Uusiku observed that while total debt stood at N$158.2 billion at the end of June 2017, government's fiscal consolidation framework had helped stabilise the debt stock.
“Namibia's total debt stood at N$158.2 billion at the end June 2017, reflecting a year-on-year (y-o-y) growth of 8.5% and a month-on-month (m-o-m) contraction of 0.3%. The monthly contraction in overall debt is evident in the corporate and government debt components (-0.2% and -1.0%), signifying a phase of continued fiscal consolidation, as the economy slows,” said Uusiku.
Private-sector credit extension (PSCE) continues on its downward trajectory, growing by 8.1% in June 2017, after the May increase of 8.5% was short-lived, according to him.
“On the contrary, unsecured lending continues to surprise on the upside, registering growth of 12.6% y-o-y 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 normalizing the ratio between secured and unsecured lending,” he said.
Uusiki also expressed satisfaction that the growth in government borrowing was below its long-run average of 24.4%.
“Of interest to note is that, although government debt is at its all-time highs of N$70.5bn 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$28.5 billion by June 2017) and the risk of a slowing economy, which could increase the risk of debt sustainability,” said Uusiku.
According to him, the country's reserves will be bolstered by an improvement in the mining sector and outstanding payments for to the Bank of Namibia by Banco Nacional de Angola.
“Looking ahead, we expect the foreign reserves to be 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,” said Uusiku.
STAFF REPORTER
Looking into the data, economist Frans Uusiku observed that while total debt stood at N$158.2 billion at the end of June 2017, government's fiscal consolidation framework had helped stabilise the debt stock.
“Namibia's total debt stood at N$158.2 billion at the end June 2017, reflecting a year-on-year (y-o-y) growth of 8.5% and a month-on-month (m-o-m) contraction of 0.3%. The monthly contraction in overall debt is evident in the corporate and government debt components (-0.2% and -1.0%), signifying a phase of continued fiscal consolidation, as the economy slows,” said Uusiku.
Private-sector credit extension (PSCE) continues on its downward trajectory, growing by 8.1% in June 2017, after the May increase of 8.5% was short-lived, according to him.
“On the contrary, unsecured lending continues to surprise on the upside, registering growth of 12.6% y-o-y 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 normalizing the ratio between secured and unsecured lending,” he said.
Uusiki also expressed satisfaction that the growth in government borrowing was below its long-run average of 24.4%.
“Of interest to note is that, although government debt is at its all-time highs of N$70.5bn 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$28.5 billion by June 2017) and the risk of a slowing economy, which could increase the risk of debt sustainability,” said Uusiku.
According to him, the country's reserves will be bolstered by an improvement in the mining sector and outstanding payments for to the Bank of Namibia by Banco Nacional de Angola.
“Looking ahead, we expect the foreign reserves to be 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,” said Uusiku.
STAFF REPORTER
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