Downgraded over eroded fiscal strength

Namibia smarts under rating

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.

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

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. – Xinhua