BoN looks to GIPF to bolster reserves

The Bank of Namibia (BoN) is hoping to conclude its asset swap with the Government Institutions Pension Fund (GIPF) within a month, in a move that is aimed at bolstering the country’s international reserves.
Despite the asset swap being open to other institutions with external assets, the lack of appetite has resulted in the pension fund emerging as the biggest participant.
According to the apex bank, N$5 billion still remains part of the offering, before the conclusion of the program that started last year, which is targeting assets owned by the pension fund outside the country.
“We are hoping to have completed the whole program within a month or so. It started last year already and we have swapped some assets to date and the program is continuing,” BoN Governor Ipumbu Shiimi told the Windhoek Observer.
This comes as N$3 billion was raised last year from the exercise with the cash-rich GIPF, which is currently sitting on over N$97 billion worth of assets, as at the end of June 2016.
“We swapped about N$3 billion worth of assets last year and we have another N$5 billion in the offering with the GIPF,” the BoN governor said.
On his part, GIPF Chief Executive Officer, David Nuyoma, said that the pension fund was already engaged with the central bank on the second swap, without giving details on the value of assets.
“Yes, we are currently in the process of implementing the second leg of the asset swap. The bank is not only doing this with GIPF. The bank approached most institutional investors to do likewise,” he said.
“N$3 billion was done in 2015. The Bank of Namibia issued us with a Namibia dollar denominated debt instrument to the same value as the portfolio swapped, the returns of which depends on the returns earned on the swapped portfolio.”
The move by the central bank aims to achieve four to five months of import cover for the country, which has struggled to maintain sufficient foreign reserves, with the country`s reserves having dipped to N$19, 2 billion or 2. 4 months of import cover in August, below the international benchmark of three months.

There was a huge boost for the country’s foreign reserves in December last year, when the total stood at N$23 billion, after Namibia used US$300 million from its issuance of a US$750 million 10-year sovereign bond to defend its reserve position.
A country of Namibia’s economic size is required to have at least five months of import cover through its foreign reserves, while other regional countries, such as Swaziland, Lesotho and Botswana have stable reserves of six months, five months and 17 months of import cover, respectively, which they have built up over the years.
Quizzed on GIPF’s share of the N$2 billion raised from a government auction held last Tuesday, towards funding the N$8,6 billion budget deficit ,Nuyoma was mum, only confirming the participation of the fund.
“We took part in the special auction last week,” he said.
This comes as speculation is rife that the pension fund took up 90 percent of the instruments on offer at the auction, due to a low uptake by other investors, who are increasingly concerned about the proposed empowerment policy, NEEEF.

Asked if the GIPF planned to bid for the remaining N$4,2 billion in government instruments, to be issued under its funding raising initiative towards meeting its budget deficit, after having raised N$4,4 billion to date, Nuyoma was non-committal.
“The GIPF takes part in regular bond auctions by the Bank of Namibia and we will apply for instruments available, depending on our need for such instruments. We also wish to add that our actions in this regard are guided by our investment policy and our asset allocations are carried out in line with the asset liability model,” he said.
Namibia, according to President Hage Geingob’s statement issued in the United States recently, is planning to raise US$5 billion in loans and bonds over the next decade, to help diversify and industrialise its economy.
This will be raised through the issuance of rand-denominated bonds and funding from countries, including the United States, China, India and Japan.