By Hilary Mare
ACCORDING to the Bank of Namibia (BON) money and banking statistics released recently, Government bonds (longer than 12 months) broke growth records by growing by 5.3 percent m-o-m in November 2016 compared to 0.8 percent recorded in the prior month.
On an annual basis Government bonds grew by 51.6percent in November 2016, the highest growth in bonds ever recorded.
In this view, Purvance Heuer the director for research and securities at Simonis and Storm attributed this high increase to the private placement that took place last year.
“Our view is that bond debt will be elevated further by the private placement that took place during December 2016,” he said. In addition, shorter term treasury bills (TBs) debt grew at a slower pace of 0.3 percent in November compared to 0.5 percent in the prior month. On an annual basis, TBs grew by 9.0 percent compared to 48.6 percent in the prior year.
On the other hand, banking statistics revealed that in the same reporting reporting period of November 2016, total Namibian debt (comprising of domestic and foreign government, corporate and household debt) grew at 13.8 percent y-o-y compared to a 33.3 percent growth recorded in the prior year, but slightly up compared to 10.7 percent y-o-y in the prior month.
Essentially, domestic private sector demand for credit measured by Private Sector Credit Extension (PSCE) reached its lowest growth of 9.3 percent since January 2011. Total debt grew by 13.8 percent y-o-y to N$151.9 billion in November compared to N$133.5 billion recorded at the end of November 2015. On a monthly basis, total debt grew by 2.0 percent compared to a 2.2 percent recorded in October 2016.
“The monthly slow growth in total debt can be attributed to the slowdown in Government debt by 2.8 percent compared to 4.9 percent growth recorded in October 2016. Household and corporate debt recorded a growth rate of 1.9 percent m-o-m and 0.3 percent m-o-m from 0.8 percent and -0.5 percent, respectively in the October 2016,” explained Heuer.
Annual growth in corporate debt slowed to 7.9 percent in November 2016. This is the lowest growth since 5.8 percent recorded in December 2011. With slowing demand and growth uncertainty in the country, businesses continue to be under pressure. Business borrowing through all credit facilities has declined on an annual basis, with mortgage loans reaching its lowest growth rate of 1.5 percent since a contraction (7.4 percent) in June 2008. Furthermore, annual growth in household debt remains subdued.
The growth in public debt as a percent of GDP has increased significantly since September 2015 when the Eurobond was established. Public debt as a percent of GDP has more than doubled over the past 10 years to 45.0 percent in November 2016 PSCE as a percent of GDP increased to 57.3 percent compared to 45.7 percent in November 2011. Government has become a larger part of the economy. Foreign reserve levels increased by 3.1 percent m-o-m to N$25.9billion in November 2016 after a 5.2percent decline recorded in the October 2016. On an annual basis, foreign reserves increased at a slower pace of 4.3 percent in 12 months.
“The Bank of Namibia attributes the monthly growth in foreign reserves to net commercial bank sales of Rand coupled with the USD receipts with respect to the receivables from the Banco National de Angola. Our view is that the current foreign reserve level remains sound to support and maintain confidence in the market,” said Heuer.
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