By Hilary Mare
ACCORDING to monthly banking statistics released by the Bank of Namibia (BoN), total debt as a percentage of GDP stood at 38.5 percent during June 2016 (SS estimate), which is above the fiscal target of 35.0 percent.
The report states that domestic debt amounted to N$33.8 billion in June, which represents a 21.0 percent of GDP. Domestic debt instruments grew by 2.1 percent m-o-m during June compared to 1.4 percent in the prior month.
Director: Research and Securities at Simonis Storm Securities Purvance Heuer revealed that the growth in debt instruments was mainly driven by the increase in the demand for short term bonds (TBs).
“TBs grew by 2.8 percent m-o-m to N$13.4bn in June 2016 compared to 1.5 percent in May 2016. Meanwhile, the longer term bonds grew by 1.3 percent m-o-m and by 36.2 percent y-o-y to N$19.3bn during June 2016. Going forward, the weaker demand in medium term bonds is likely to reduce the growth in domestic debt, however this may be offset by demand in TBs,” he said.
Essentially total Namibian debt (comprising of domestic and foreign government, corporate and household debt) grew significantly by 30.6 percent y-o-y compared to a growth rate of 16.1 percent recorded in the prior year. Private sector debt also rose by 12.1 percent y-o-y compared to 11.1 percent yo-y recorded during May 2016, albeit still at a slower pace when compared to a 14.7 percent y-o-y recorded in the prior year. The growth in PSCE was mainly driven by growth in business debt. The total domestic debt grew by 31.3 percent y-o-y. Total debt grew by 30.6 percent y-o-y to N$143.6 billion at the end of June compared to N$109.9 billion recorded in the prior year. On a monthly basis total debt contracted by 0.6 percent compared to a positive growth of 2.2 percent in the prior month. The contraction in total debt can be attributed to a monthly contraction in Government debt by 2.9 percent compared to a 5.0 percent recorded in the prior month as a result of a stronger rand (reducing the inflationary growth in foreign debt).
“The Government remains the biggest contributor to increasing total debt levels. The 49.7 percent m-o-m spike in government debt during September 2015 resulted from the issuance of the two JSE bonds worth N$750.0million. Annually, Government debt grew by 66.6 percent in June compared to an 18.9 percent recorded in the prior year. Corporate and Household debt grew gradually by 12.7 percent y-o-y and 11.7 percent y-o-y, respectively,” added Heuer.
Private Sector Credit Extension (PSCE) continues to grow at a slower pace of 12.1 percent y-o-y compared to 14.7 percent in the prior year. On a monthly basis, PSCE rose by 1.2 percent which is the highest in seven months since a 1.9 percent monthly growth recorded in November 2015. The monthly growth in PSCE can be attributed to an increase in borrowings through overdraft facilities and instalment credit by 5.2 percent m-o-m and 1.1 percent m-o-m, respectively. The sharp increase in overdrafts is mainly prompted by a high demand for credit by individuals of 11.3 percent m-o-m compared to -0.1 percent in the prior month. “Furthermore, monthly growth in instalment credit during June 2016 was driven by businesses. This is evident in the number of medium to extra heavy commercial vehicles (mainly used for businesses purposes) that increased by 49.0 percent m-o-m to 76 units during June 2016. New legislation relating to credit on movable goods will put pressure on instalment credit going forward as there are now limits stipulated on term duration and minimum deposits,” extended Heuer.
Foreign reserve levels came in 15.0 percent lower compared to a N$24.8 billion recorded in May 2016. The Bank of Namibia attributed the slowing foreign reserves to an increase in net Government payments as well as an increase in foreign currency sales to the commercial banks.
“We continue to believe that foreign reserves will remain under pressure. Apart from financial strain faced by the Angolan economy, we believe that the strong rand (weaker USD) will affect the value of foreign reserves,” concluded Heuer
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