AfDB loan and private sector borrowings push external debt higher- PSG Konsult
Government’s foreign debt rose by 1.5% year on year (y-o-y) to N$27.69 billion in the second quarter of 2017 following the approval of the first tranche of a loan agreement with the African Development Bank (AfDB).
While, Private sector foreign debt rose by 14.9% y-o-y) to N$55.35 billion in the period under review, reflecting an increase in long-term loans during this period.
PSG Konsult Namibia forecast an increase in external debt this year. “Private sector external debt growth has moderated (from 36.3% y-o-y in 2014 to 7.9% y-o-y in 2016) and will likely reflect another modest growth rate in 2017, while public sector debt is forecast to increase at a faster rate in 2017 and 2018 due to the $750m AfDB loan agreement,” the firm’s analysts said.
The AfDB loan has pushed up multilateral loans’ share of total external debt significantly, from 9.0% in Q1 to 19.1% in Q2, while the share of bilateral loans (10.9%) and JSE listed bonds (10.4%) have decreased slightly.
PSG Konsult further stated that the Eurobond debt (59.6%) remains the major contributor to the government’s external stock of outstanding debt.
“More than 60% of the government’s total foreign debt outstanding is denominated in US dollars, while slightly more than 22% is denominated in rand. The share of external debt denominated in the South African currency also rose significantly in Q2 (from 9.9% in Q2 2016) as a result of the AfDB loan, which is rand-denominated,” said PSG.
Namibia issued its first $500 million Eurobond in 2011 and then opted to again tap international credit markets when it issued a $750 million Eurobond in October 2015. The latter pushed the central government’s share of gross external debt up to 35.9% at the end of Q4 2015 from 19.6% at the end of Q1 2015.
However, by the end of the Q2 2017, the central government’s share declined to 31.9% while private sector debt accounted for 74.6% of the country’s total external debt at the end of Q1 2015, but this share declined to 63.8% at the end of Q2 2017.