Frozen tenders spike debt
The Bank of Namibia’s monthly debt statistics for October show domestic and foreign government, corporate and household debt grew yearly by 27.0% compared to last year’s growth rate of 18.5%
Influenced by a 10.1% decline in foreign reserve levels to N$20.5 billion during August 2016 compared to N$22.8 billion recorded in the prior month. The Bank of Namibia cites the decline came as a result of net government payments and net commercial banks’ Rand purchases.
The Corporate category continues its downward trend which in turn put overall pressure on the Private Sector Credit Extension (PSCE). Despite the slight monthly up tick in the growth of individual credit facilities, Private Sector Credit Extension are expected to continue to be under pressure over the short to medium term.
“We are of the view that the reserves will improve slightly in September as Banco de Angola settled their quarterly instalment of US$20 million.” Simonis Storm Securities financial services said, adding that reserves remain under pressure and on a downward trend.
Meanwhile, annual growth in Treasury Bills slowed significantly by 11.1% compared to 45.1% recorded in the prior year. On a monthly basis, the Treasury Bills debt instruments grew at a slower pace as the demand for government bonds and Treasury Bills dried up. This is evident as the tenders received is low compared to the amount offered, Simonis Storm Securities said.
The demand for Bonds was weak in the third quarter of 2016. The demand for debt instruments such as Treasury Bill’s and normal short term Bonds has dried up in recent tenders, specifically in August and beginning of September 2016. The low demand at current prices will result in government bond yields rising at the longer end of the curve which will eventually lead to a steepening yield curve going forward.
Bonds account for 57.1% of the total amount outstanding, while Treasury Bills account for 39.3%. The minimal outstanding amount stood at N$34.4 billion at the end of August compared to N$26.6 billion in the prior year.
Total debt grew on year on year to N$144.1 billion in August 2016 compared to N$113.4 billion recorded at the end of August 2015.
Total domestic debt grew by 0.5% monthly to N$34.3 billion at the end of August 2016 compared to 1.1% growth recorded in July 2016. Longer term government bonds constitute about 60% of total domestic debt and had grown by 35.8% yearly to N$19.6 billion in August 2016 from N$14.4 billion in August 2015.
In contrast, Household debt grew by 1.4%monthly in August compared to 0.5% recorded in the prior month. “Our view is that the government will have to continue implementing further consolidation and cost cutting measures.” Simonis Storm Securities financial services said in the statement released last week. Borrowing through mortgage loans continued to grow at a slower pace of 10.5% in August compared to 16.7% recorded in the prior year. On a monthly basis, Mortgage loans grew by 0.8% in August 2016 compared to 0.6% in the prior month. The monthly growth in total mortgage loans come from borrowings by individuals that grew by 1.2% month to month in August 2016 compared to 0.6% recorded in July. Borrowing through overdraft facilities and instalment credit picked up on a monthly basis, growing by 1.1% and 1.6%, respectively compared to -3.4% and 1.2% in July.
On a monthly basis, total debt contracted by 1.9% compared to a positive 2.5% growth rate recorded in the prior month. The contraction can be attributed to a monthly decline in government debt by -5.8% coupled with slow growth in corporate debt of 1.2%.