Down­graded over eroded fis­cal strength

Namibia smarts un­der rat­ing

The Star Early Edition - - BUSINESS REPORT - Won­der Guchu

NAMIBIA’S Pres­i­dent Hage Gein­gob has said Moody’s should not have based its lat­est rat­ing on the forth­com­ing rul­ing Swapo Party elec­tive congress and the na­tional elec­tions sched­uled for 2019.

Gein­gob said this when he ad­dressed a closed door Swapo cen­tral com­mit­tee meet­ing on Sat­ur­day in Wind­hoek.

Swapo will hold its elec­tive congress in De­cem­ber and al­ready some mem­bers are jostling for po­si­tions.

Neg­a­tive out­look

Moody’s down­graded Namibia’s credit rat­ing from Baa3- to Ba1 but main­tained the neg­a­tive out­look on Fri­day.

The rat­ing agency said it down­graded Namibia credit rat­ings be­cause the coun­try’s fis­cal strength has been eroded and there is a lim­ited in­sti­tu­tional ca­pac­ity to re­spond to shocks as well as re­newed risk of liq­uid­ity pres­sures.

The agency noted that the pub­lic debt bur­den had risen rapidly over the past sev­eral years, from the low level of 26 per­cent of GDP when it first as­signed the rat­ing in 2011 to the cur­rent 42 per­cent. “The high share of debt in for­eign cur­rency (other than rand) makes the fis­cal po­si­tion vul­ner­a­ble to a rapid de­te­ri­o­ra­tion in the event of an ex­change rate shock, as was the case most re­cently in 2015,” it said.

It fur­ther noted that other sources of po­ten­tial de­te­ri­o­ra­tion are un­ex­pected short­falls in the South­ern African Cus­toms Union rev­enues rel­a­tive to fore­casts as well as ex­pen­di­ture over-runs in the con­text of up­com­ing rul­ing Swapo lead­er­ship elec­tions (end-2017) and pres­i­den­tial elec­tions (2019).

Moody’s also low­ered Namibia’s lo­cal cur­rency bond and bank de­posit ceil­ings to A2 from A1; the for­eign cur­rency bank de­posit ceil­ing to Ba2 from Baa3; and the for­eign-cur­rency bond ceil­ing to Baa2 from A3.

Gein­gob told the Swapo del­e­gates that the agency should not have linked the Swapo elec­tive congress to what is hap­pen­ing in the coun­try cur­rently.

Noth­ing changed

Moody’s should leave Swapo sup­port­ers to ex­press them­selves on the is­sues of the party. “We are also of the view that noth­ing ma­te­rial has changed since our last rat­ing val­u­a­tion. It is there­fore not true to say that there will be an in­crease in spend­ing in the run-up to the Swapo congress,” Gein­gob said.

He fur­ther said that Moody’s did not con­sider ma­te­rial fac­tors that point to­wards an im­prove­ment of the coun­try’s fis­cal po­si­tion to jus­tify the down­grade.

The coun­try’s pub­lic debt has risen from 26% in 2011 to 42% of GDP at present.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.