Analysts urge government to take on fiscal consolidation path amid Fitch downgrade
To recover its investment-grade status, the government will have to get back on the fiscal consolidation path, which may require unpopular decisions such as reducing government personnel, and defence and security expenditure, PSG Konsult Namibia said.
Fitch Ratings yesterday, Monday 20 November announced its decision to downgrade Namibia’s long-term foreign currency credit rating to sub-investment grade (‘BBB-‘ to ‘BB+’)and changed its outlook from negative to stable., becoming the second major credit rating agency to do so in three months.
“The government will have to improve its financial management and revenue collection capabilities, and amend any legislation that is causing investor uncertainty. We are currently reviewing our own credit rating for Namibia, which should be updated later this month,” PSG Konsult stressed.
The rating by Fitch was made just after the Finance Minister, Calle Schlettwein delivered the mid-term budget review two weeks ago. Local economic analysts voiced against the budget review, saying that it did not achieve fiscal consolidation.
Additional factors contributing to the loss of investment-grade status include dampened confidence in the country’s financial management capabilities following the government’s liquidity crunch, increasingly anti-market policy proposals and generally weaker regional growth which has a significant impact on government revenue.
“The lower credit rating will adversely affect the ability of the central government, parastatals and banks to borrow on the international market and will weaken the attractiveness of Namibia as an investment destination,” PSG Konsult stated.
Fitch’s downgrade comes just three months after Moody’s Investors Service also downgraded Namibia to junk in early August.
