Govt mitigating economic shocks
By Hilary Mare
GOVERNMENT is confident that the policy packages that it has started to roll out will place the economy on a firm positive and sustainable growth trajectory over the medium to long term, Finance Minister Calle Schlettwein has said in response to a Moody’s Credit Rating Opinion on Namibia released last week.
The Minister extended that throughout the years, Namibia has demonstrated its ability and resilience to deal with shocks and also to direct policy actions to addressing socio-economic development needs.
In its ratings action last week, Moody’s downgraded Namibia’s long-term non-Rand foreign currency bonds from Ba1 sub-investment grade assigned in 2017 with a negative outlook, to a Ba2 sub-investment grade, with a stable outlook.
This is a notch lower than the previous rating, reflecting Moody’s view that the domestic economy remains under recessionary pressures, amidst external shocks arising from the impact of the prevailing severe drought condition and lower sub-regional growth outlook.
While the long-term non-Rand, foreign bonds are rated at sub-investment grade, the Rand-denominated bonds are still at investment grade.
“We remain optimistic that growth prospects will gain traction as the implementation of the adopted measures is scaled-up. The Government summons the collective support of all Namibians and call on the private sector and investor community to remain positive and supportive as the economy rebounds to positive growth, thus enabling broad-based socioeconomic development and shared prosperity,” Schlettwein said.
In its report, Moody’s highlighted that key drivers which weigh on the ratings and the outlook are weakening of economic growth which Moody’s expects to contract by 1.5 percent in 2019, against its initial positive growth expectations, reduced ability to stabilize growth in public debt through cutting back on spending, particularly the inability to reduce the high wage bill costs in a low growth environment, the negative impact of temporary factors such as the severe drought in the agricultural sector and the weak growth in the mining sector, and declining national competitiveness relative to global rankings.
Government, in collaboration with the private sector, has already commenced with the implementation of growth enhancing measures.
These include implementation of an increased development budget by 42.2 percent as a lever for supporting domestic economic activity, implementation of the project financing arrangements with the African Development Bank to the tune of N$4 billion over the next three years for the agricultural mechanization program, rail and road infrastructure projects as well as essential public infrastructure projects in the education sector, implementation of SME and youth entrepreneurship financing facilities at the Development Bank of Namibia which were launched in early November 2019 and already became effective on 1 December 2019 and implementation of directives for local sourcing and local empowerment provisions in public procurement sphere to stimulate domestic productive capacity, local value and jobs.
Furthermore, these stakeholders have commenced with the implementation of the recommendations of the 2019 Economic Growth Summit in the broad areas of structural policy reforms, including measures to improve national competitiveness and private sector investment commitments in the local economy, increased mobilization of domestic savings through increased domestic asset requirement from 35 percent of total assets to 45 percent by December 2018, thus releasing money into the domestic economy to finance investments in the real and services sectors and continuing to strike the fine balance between fiscal consolidation and achieving broad-based economic growth in favour of longterm sustainability and to deliver the overall budget as appropriated.