Govt debt now 59% of GDP

By Hilary Mare

THE Bank of Namibia has revealed that Government’s total debt stock has flashed past 50 percent of Gross Domestic Product (GDP) and has been recorded as 58.7 percent at the end of June from 49.2 percent a year earlier.

In the central bank’s quarterly bulletin released last week, Dr Emma Haiyambo, BoN director of strategic communications and financial sector development highlighted that government debt continued to increase year-on-year, reflected in both the domestic and foreign borrowings.

“Central Government loan guarantees as a percentage of GDP rose slightly year-on-year by 0.1 percentage point to 6.7 percent points during the period under review. At this ratio, total loan guarantees remained below the Government’s set ceiling of 10 percent of GDP,” further stated Haiyambo.

Activity in the domestic economy slowed during the second quarter of 2020 compared to the corresponding quarter of the previous year, Haiyambo said adding that the slower activities were particularly reflected in the tourism, transport, manufacturing, wholesale and retail trade, construction and mining sectors and were mainly attributed to Covid-19 pandemic-induced effects.

“Very weak activity was reflected in the collapse of passenger arrivals in the tourism sector and lower cargo volumes in the transport sector. Moreover, lower output was registered in the manufacturing sector, while real turnover in the wholesale and retail trade sector also declined. The construction sector activity also slowed due to the negative impact of the Covid-19 pandemic.

“Similarly, in the agriculture sector, livestock marketing activity declined as a result of farmers restocking during the period under review. Signs of improvement were, however, observed in the communication sector during the period under review. Namibia’s inflation rate decelerated further during the second quarter of 2020, due to a lower inflation for housing, transport, and alcoholic beverages and tobacco,” Haiyambo explained.

On the external sector front, Haiyambo noted that Namibia’s current account registered a surplus during the second quarter of 2020, while the International Investment Position (IIP) recorded an increased net asset position.

“The surplus on the current account during the period under review was due to the surplus recorded on the merchandise trade balance, reflecting a significant decline in import payments and an increase in export earnings, alongside higher SACU earnings,” she said.

The current account recorded a surplus of N$5.1 billion (12.0 percent of GDP) during the second quarter of 2020, a turnaround from a deficit of N$2.1 billion in the corresponding period of 2019. The stock of international reserves stood at N$31.8 billion at the end of the second quarter of 2020, representing an import cover of 6.5 months.

“At the end of the second quarter of 2020, Namibia’s international investment position recorded an increased net asset position of N$6.2 billion compared to a net liability position of N$11.1 billion a year earlier. The Namibia Dollar weakened against all major trading currencies over the year to the end of the second quarter of 2020, mainly on the back of growing concerns over the impact of Covid-19,” concluded Haiyambo.