Govt debt soars in October

The month of October saw the highest uptake of debt by the government, research by Simonis Storm has indicated.

"In October 2024, Namibia experienced its highest issuance of government debt securities for any month of the fiscal year (FY) 2024/25 thus far, totaling N$2.22 billion, according to the Bank of Namibia’s updated borrowing plan," Simonis Storm said.

"However, despite this significant issuance, the country’s total government debt saw a net increase of only N$956 million, largely due to the redemption of the government coupon (GC) 24 bond. The month-on-month (m/m) growth in government debt was 0.8%," it added.

According to Simonis Storm, domestic debt as a percentage of gross domestic product (GDP) stood at 45% in October.

"This was lower than the 1.73% increase recorded in September, despite the conduct of three bond auctions and five treasury bill auctions, which is more than typical for a month. By the end of October, Namibia’s domestic debt-to-GDP ratio stood at 45.1%, with total domestic debt reaching N$124.5 billion," Simonis Storm said.

Including foreign debt, the overall debt-to-GDP ratio expanded to 60%, reflecting the continued reliance on both domestic and international markets to meet funding needs.



Growth expectations

Following finance minister Ipumbu Shiimi’s medium-term budget speech, which forecast a 3.6% GDP growth for 2024 and 5.4% for 2025, projected growth may be impacted by constraints in the mining sector due to production challenges, Simonis Storm said.

"This projected economic expansion, however, is contingent upon stable demand for key mineral exports, particularly diamonds, and could face headwinds from potential production constraints," Simonis Storm noted.

Developments in the oil and gas sector, coupled with the strength of the tourism sector, could, however, help drive growth in the economy, it added.

"Conversely, the growing oil and gas sector, along with robust tourism and foreign direct investment (FDI), is expected to provide a substantial boost to economic growth as these industries progress toward commercialisation," Simonis Storm said.



Fiscal discipline lauded

The government was also commended for its efforts to rein in spending while increasing tax collection, Simonis Storm said.

"Additionally, the government’s fiscal position has shown improvement. The budget deficit for FY 2024/25 narrowed by N$277.3 million, reflecting efforts to control debt accumulation and optimize tax revenue," the firm stated.

According to Simonis Storm, domestic debt as a percentage of gross domestic product (GDP) stood at 45% in October.

The government’s ability to collect more tax revenue than initially forecast was further evidence of its fiscal discipline, Simonis Storm noted.

"Tax collections surpassed the initial forecast of N$81.1 billion, reaching N$81.5 billion, underscoring improved fiscal discipline and potential resilience in the government’s revenue base," it said.

"This narrowing budget deficit suggests a more sustainable fiscal outlook, which could positively influence investor confidence in Namibia’s debt securities and support lower funding costs in the future," it added.