Government, Moody’s in crunch talks

10 November 2017
The Government and officials from Moody’s Investors Service this week held talks on Namibia’s credit rating during which,
the Government reiterated its stance that the ratings agency was wrong when it downgraded the country’s long-term senior unsecured bond and issuer ratings to Ba1 from Baa3 and maintained the negative outlook in August.
“We spoke to them yesterday (Tuesday) and the day before yesterday (Monday),” confirmed Finance Minister, Calle Schlettwein in an interview.
The talks were part of the scheduled annual meetings on Namibia’s rating, the minister said.
“We have reiterated what we have said before and now, we are of course moving on and we discussed the mid-term budget review and we are awaiting their report,” Schlettwein said.
Moody’s latest rating on Namibia is expected in December.
Asked if he thinks Moody’s will revise its August downgrading, Schlettwein said he could not ‘pre-empt’ what the agency will do.
Moody’s raised three main concerns with Namibia, namely imbalances of public finances, weak institutional capacity and liquidity vulnerabilities going forward.
“While we find such action to have lacked substantive assessment of domestic developments and consultation, the key consideration is for Namibia to continue addressing the rating weaknesses raised by ratings agencies, public rebalancing and addressing the development needs in the real sector,” Schlettwein said during his mid-term budget address in Parliament last week.
According to analysts, Namibia can expect to borrow more money, which may raise further serious concerns about the country from international ratings agencies. The mid-term budget showed that the Government plans to spend an additional N$4, 5 billion in the 2017/18 financial year.
Eloise du Plessis, Head of Research at PSG Namibia, said she was surprised by the additional spending since revenue is expected to decline over the Medium Term Expenditure Framework (MTEF).
Economic Association of Namibia Executive Director, Klaus Schade, also noted that fiscal consolidation has not yet achieved the desired targets.
He noted that the budget deficit had increased to 5,3 percent from an envisaged 3,6 percent and the debt to GDP ratio will remain at about 44 percent without decreasing as expected in the main budget.
Confirming Moody’s concerns were figures showing that the Government will pay N$2,2 billion in more expenditure arrears from the 2016/2017 budget, whose payments were frontloaded in August this year.
Despite attempts to save money in the current budget through spending cuts, figures showed that only N$486 million was saved.
The spending cuts came from savings on travel, training, cuts on corporate gifts and refreshments as well as hiring freezes, among other cuts.
The minister disclosed that the budget deficit for the 2016/17 financial year increased from the revised budget estimate of 6,3 percent to 6,9 percent.

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