Simonis Storm voices confidence in govt debt strategy

Stockbroker Simonis Storm has voiced its confidence in the government’s ability to manage public debt. This comes as the redemption date for the government’s 2015 US$750 million Eurobond draws closer.

Explaining its stance, the company said healthy economic growth would be sufficient to help the treasury carry its obligations, despite a miniscule growth in public debt. “With the economy experiencing healthy growth, we believe that the government can manage the country's debt sustainably. For the first quarter of 2024, gross domestic product (GDP) growth was reported at 4.7%,” Simonis Storm said in its fixed income report for June.



Debt allocation

The increase in domestic debt was primarily driven by higher net issuance of treasury bills (TBs) and internal registered stock (IRS). TBs rose by 2.2% month-on-month, IRS by 1.08%, and inflation-linked bonds (ILBs) increased by a moderate 0.9%, a Simonis Storm analysis showed.

By the end of June, IRS had an outstanding debt amount of N$69.94 billion, followed by TBs at N$40 billion and ILBs at N$9 billion. Overall, the total net issuance slightly exceeded the N$1.65 billion outlined in the borrowing plan by N$30 million, ending at N$1.68 billion.

“This increases the likelihood of slight under-allocations on IRS for the upcoming month. However, we do not expect a significant deviation from the borrowing plan,” it said.

Reflecting on macroeconomic conditions, Simonis Storm projects a 25 basis points cut before the end of the year.

"The Namibian yield curve reflects robust GDP growth and significant economic developments, including substantial foreign direct investments in oil, gas and green hydrogen projects. While South Africa's challenges contribute to higher sovereign risk, the outlook for Namibia still appears more stable and promising."



Eurobond redemption

Finance minister Ipumbu Shiimi said Namibia will honour its US$750 million (N$14 billion) Eurobond obligation, which matures in 2025.

He made the remarks during an appearance on Network Television’s The Agenda, saying Namibia had in the past demonstrated its ability to settle its debt obligations. Shiimi added that government had been putting money aside to meet its debt obligation. “This is the first Eurobond that is maturing," he said.

"We had one that we retired in 2021, so that one is fully repaid, so we have experience in repaying our Eurobonds."