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Fitch affirms Namibia’s credit outlook at negative

Fitch affirms Namibia’s credit outlook at negative

International rating agency, Fitch Ratings has affirmed Namibia’s long-term foreign-currency rating at ‘BB’ with a negative outlook, due to a continued rise in general government debt driven by persistent wide fiscal deficits and a protracted recession aggravated by the coronavirus pandemic shock.

Fitch said the rating also reflects challenges to fiscal consolidation from a difficult social context marked by a particularly high level of inequality.

The countries government debt has been steadily increasing since end of 2014/15 financial year, despite significant measures towards fiscal consolidation, illustrated by a 7.6% of GDP narrowing in the primary balance excluding transfers from the South African Customs Union between financial years 2015/16 and 2018/19.

Fitch projects government deficit to double to 10.7% of GDP in 2020/21 from 5% of GDP in 2019/20, exceeding the forecast ‘BB’ median of a 7.8% of GDP deficit in 2020.

The government is preparing to refinance part of the US$500 million Eurobond principal repayment coming due in November 2021, possibly through international market issuance, to avoid a sharp international reserve drawdown.

The authorities have also applied for a USD192 million (1.7% of GDP) loan from the IMF under the Rapid Credit Facility and N$5 billion (2.9% of GDP) under the African Development Bank’s Covid-19 Response Facility. They expect both loans to be disbursed in two equal tranches, in 2020/21 and 2021/22.


 

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Donald Matthys

Donald Matthys has been part of the media fraternity since 2015. He has been working at the Namibia Economist for the past three years mainly covering business, tourism and agriculture. Donald occasionally refers to himself as a theatre maker and has staged two theatre plays so far. Follow him on twitter at @zuleitmatthys

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