By Confidente Reporter
NAMIBIA is suffocating in a debt of over N$25 billion owed to China, Germany and other foreign financial institutions in concessional loans, of which 10 percent is owed to China, according to Finance Minister Calle Schlettwein.
This financial year Treasury will spend nearly N$840 million at the current exchange rate in servicing its foreign debt.
Confidente has also learnt that during the 2017/2018 national budget, Treasury will pay N$198 million to the Chinese government with N$48 million of this amount being interest.
The Chinese concessional loan payment will be completed in 2025.
In what might raise eyebrows or a classical case of price inflating the finance ministry has been battling to bring to an end, Confidente is informed that the borrowed N$25.5 billion was used to construct a National Youth Centre, the 60km Omakange- Ruacana road, the 90km Engela-Outapi road, installing of scanners at all border posts, installing the Electronic Documents Recording Management System (EDRMS) in the Office of the Prime Minister and purchasing of TransNamib locomotives.
Confidente is also informed that 65 percent of the N$25.5 billion is owed to international issued bonds or the Eurobond while 30 percent of the debt is from bilateral agreements from the governments of China and Germany with 10 percent being loans extended to Government by the Development Financial Institutions and the remaining five percent from the Johannesburg-listed bond.
“Out of N$25.5 billion foreign debt, to date a total of N$2.4 billion or 10 percent of total foreign debt has been sourced through this arrangement. The government has made a commitment to honour its financial obligation towards her lenders as per signed agreements. In this regard, a total N$198 million is budgeted annually to repay the Chinese loan. This is made up of N$150 million capital repayment and the interest payment of N$48 million.
“…Through development cooperation, Namibia has so far received concessional funding and technical/grants from the Government of the Federal Republic of Germany with smaller terms and conditions in the range of EUR900 million or N$12.2 billion. Technical cooperation is EUR300 million (N$4 billion), financial cooperation or concessional loans amounting to EUR600 million (N$8 billion) and about EUR200 million (N$2.7 billion) worth of technical and financial cooperation is yet to be concluded.” The Finance Minister said the terms of Chinese concessional loans are two percent interest, 0.5 percent commitment fees on undisbursed balance of the loan, five years grace period before repayment of principal debt starts and a 15-year repayment period.
Schlettwein added that although a Chinese contractor is required to work on projects the Chinese government has extended loans on; it was worth highlighting that projects that benefitted from this funding were the construction of roads and the procurement method employed for these was that of the Government.
“Apart from the machinery and skill labour that Namibia does not have, the large materials consumed in this type of projects are Namibian sourced. This includes bitumen from Okahandja, diesel, sand and stone in addition to 20 percent Namibian company participation.”
Schlettwein also explained that concessional loans are extended to the Government of Namibia by the Chinese to fund projects based on the framework agreements reached by the two governments where the Namibian Government requests the Chinese Government to extend funding to its development.
“This is done in order for the Government of the Republic of Namibia to achieve its development goals as set out in the National Development Plan. These loan offers are provided within a political relationship between the two governments and contain significantly generous terms and conditions as opposed to market loans or other borrowing like those provided for by development financial institutions and Eurobonds and are the most cheapest in terms of repayment. The concessionality is achieved either through interest rates below those available on the market, the grace periods and lower management and commitment fees.”
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