Debt strategy to address foreign exchange risk

The government’s borrowing strategy for the 2024–2025 financial year aims to limit Namibia’s exposure to foreign exchange risks while addressing the country’s financial shortfalls.

The Financial Year (FY) 2024/25 Borrowing Strategy Summary released by the Bank of Namibia outlines a net financing need of N$15.3 billion for the financial year, including a significant Eurobond maturing in October 2025.

The Bank of Namibia plans to source funds primarily through local government debt securities and external debt financing, Simonis Storm said in its fixed income report for May.

“The strategy includes raising N$12.8 billion from the domestic market: N$8.8 billion from fixed-rate bonds, N$2.9 billion from Treasury Bills (TBs), and N$1.1 billion from inflation-linked bonds. A new fixed-rate bond may be issued later in the year. If the domestic target is not met, a Johannesburg Stock Exchange (JSE)-listed fixed-rate bond will be issued to cover the shortfall.”

According to the strategy, the GC26 bond offerings will be suspended in September, and the GC27 offerings will be re-opened. “Switch auctions for GC24 and GC25 will allow bondholders to move to longer-dated bonds at higher yields,” Simonis Storm said.

According to the central bank’s borrowing strategy, the debt scheduled for repayment over the next three years totals N$34.5 billion.

“This includes GC24 of N$2.30 billion maturing on 15 October 2024, GC25 of N$4.07 billion maturing on 15 April 2025, GI25 of N$1.96 billion maturing on 15 July 2025, a Eurobond of USD 750 million (N$14.3 billion) maturing on 29 October 2025, GC26 of N$6.05 billion maturing on 15 April 2026, a JSE bond (NAM04) of N$335 million maturing on 1 August 2026, and GC27 of N$5.02 billion maturing on 1 January 2027,” Simonis Storm said.



Domestic needs

The debt strategy would ensure at least 84% of Namibia’s financing needs would be addressed by domestic borrowing.

“Moreover, the government's borrowing strategy, which emphasises domestic borrowing for approximately 84% of financing needs, will effectively mitigate foreign exchange risks. By borrowing predominantly in local currency, the government avoids the potential escalation of debt servicing costs associated with exchange rate fluctuations,” Simonis Storm said.