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Govt raises N$4.4 billion to fund budget deficit

bus 23 sept 2016Government has so far raised N$4.4 billion from the required N$8.6 billion to fund its budget deficit in the current financial year through the issuance of various debt instruments, the Windhoek Observer can reveal.
“Out of the N$8.6 billion that we anticipate to raise, we have raised N$4.4 billion and it’s on different tenures coming from as low as three months and it’s a combination of instruments,” Bank of Namibia Governor, Ipumbu Shiimi said.
The latest auction closed on Tuesday, where government is said to have raised N$2 billion.
“The auction took place on Tuesday and our target was N$2 billion and we managed to reach N$2 billion. The N$2 billion is just a shortfall that accumulated during the normal auctions,” Shiimi said.
He said government still planned to approach more investors as it moves ahead to raise the required funds to meet the budget deficit.
“Come the end of the financial year, our expectations are that we would have raised the exact amount that we anticipate to raise, that is N$8.6 billion to fund the current budget deficit,” he said.
The governor said government was working according to a fundraising plan agreed to between the apex bank and the Ministry of Finance.
“After the presentation of the budget, the Ministry of Finance and the Bank of Namibia compiled a borrowing plan which is based on funding the budget deficit.
“We set up plans based on the instruments we are going to use, so in that borrowing plan we have indicated that we are going to have private placements depending on the performance of the auctions,” he said.
Quizzed on the low uptake in the initial auctions held, Shiimi said the success of the auctions depend on the timing. “Sometimes when you issue these instruments there is a huge demand and there are times where you have low demand. The interest rate environment also plays a role. A large number of investors want to buy these types of instruments when the interest rate increases.
“As a result, these investors sit with their money on the money market, waiting until such a time when the interest rates go up for them to start buying.
“It also depends on the liquidity condition in the market, so it’s really driven by a number of factors.”
Asked if the GIPF had been approached under the private placement initiative, the BoN Governor said the pension fund had participated without giving figures.
“The GIPF is a player in the market and they buy bonds and were called to participate. What we have done this time, is call everyone who has money to come and participate, and the GIPF was one of the participants in the auctions,” he said.
He, however, said no other bonds will be raised this financial year after government raises its N$8.6 billion, refusing to be drawn in commenting on plans by government to raise US$5 billion in loans and bonds over the next decade to help diversify and industrialize the economy, as announced by President Hage Geingob in the United States this week.
According to the president, Namibia plans to issue rand-denominated bonds and get funding from countries including the U.S., China, India and Japan.
Namibia has issued three rand denominated bonds since 2012, and in July sold R492 million (US$36 million) of debt maturing in August 2023 and August 2026.