The Bank of Namibia (BoN) managed to swap assets worth N$8.9 billion when it concluded its programme last month, aimed at bolstering the country’s international reserves.
The initiative, targeting assets owned by pension funds outside the country, netted N$3.9 billion last year, with the balance concluded last month.
“We have seen an increase in reserves after we signed some asset swaps with the Government Institutions Pension Fund (GIPF).We have also witnessed some inflows coming through,” BoN Governor Ipumbu Shiimi said this week.
As at 30 November, the country’s international reserves stood at N$25 billion, an increase from the previous figure of N$22.6 billion, estimated to be about 3.3 months of import cover.
The cash rich GIPF, which is sitting on N$97 billion worth of assets as at the end of June 2016, emerged as the main participant in the swap deal, exchanging N$8 billion worth of assets.
Other local pension funds showed no appetite for the asset swap, although it has since emerged that NamPower Pension Fund had also taken part.
“There is still no interest from the other pension funds. We have not been aggressive, but focused on the GIPF and NamPower,” the Governor said.
He noted that the central bank will in the future look at engaging various asset managers, mainly focusing on swapping bonds and treasury bills.
“We are not considering any other assets, only foreign assets,” Shiimi said.
“We will make up our mind if we want to swap shares. We are worried about shares because of their volatility,” he said.
The move by the central bank aims to achieve 4- 5 months of import cover for the country, which has struggled to maintain sufficient foreign reserves, despite a huge boost in December last year when the country 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 reserves, with regional countries such as Swaziland, Lesotho and Botswana having stable reserves of six months, five months and 17 months of import cover, respectively, which they have built up over the years.
The lack of appetite by pension funds for the BoN asset swap comes as Government has struggled to find takers for its bonds, a development that saw GIPF also being the main taker.
The GIPF’s role in the economy has come under scrutiny, amid allegations it was bailing out Government, which is currently weighed down by a liquidity crunch, allegations which the fund denied in the media this week.