THE Bank of Namibia (BoN) has responded to a list of questions sent by Confidente last week, prior to the publication of its lead article, which appeared under the headline, ‘BoN sees N$500m loss’.
Q: The BoN Annual Report for 2016 shows that the bank had incurred a loss of N$500 million in the year under review, after posting a profit of over N$3.4 billion in 2015. What caused this huge loss and what has the bank done to ensure that this does not occur in the future?
BoN: In line with the requirements of the International Financial Reporting Standards, the statement of comprehensive income on the revaluation of foreign currency denominated assets\liabilities is required to be disclosed as a separate line item. Revaluation gains/losses occur when the Namibia dollar (NAD) appreciates or depreciates against other convertible currencies. In the 2015 financial year, the NAD depreciated significantly against other currencies, with a resultant revaluation gain. In the same vein, in the 2016 financial year, the NAD appreciated, with the resultant revaluation loss. It is to be noted that the Bank of Namibia Act prescribes that such gains or losses should be transferred to the Revaluation Reserve Account. Accordingly, these gains or losses do not form part of our distributable profits. It is to be noted that such exchange rate movements are beyond the bank’s control and are determined by market forces. The bank will therefore continue to have currency movement gains or losses being reflected in its financial statements.
Q: Although the BoN is still owed up to N$2.7 billion by Banco Nacional de Angola, in terms of the so-called kwanza deal, the bank made a fair value adjustment of up to N$83 million. Does this mean that BoN has forfeited this amount?
BoN: No, this does not mean that the bank has forfeited the amount. The N$83 million is a notional charge, charged to the Income Statement, to comply with the requirements of the International Financial Reporting Standards, which is the basis on which the bank prepares its financial statements. Since the amounts owed by Banco Nacional de Angola do not attract market-related interest, a fair value adjustment needs to be processed, to comply with the accounting standard. Please note once again that this is a notional charge and will be reversed over the repayment period of the loan i.e. in financial years 2017 and 2018.
Q: International Monetary Fund (IMF) Securities are up by N$1.6 billion. Did the IMF give Namibia more money? Please clarify.
BoN: The increase in the IMF Securities Account is due to the 14th General Review quota increase that was effected on 24 February 2016, as well the annual Maintenance of Value adjustment that was processed in June 2016. The corresponding leg to these transactions is reflected under note number 12, ‘Other Receivables’.
Q: We also notice that the BoN governor and his deputy received 42 percent salary increases. What is the bank’s view on this, considering recent outcries over hefty salary hikes given to public officials?
BoN: The governors are contractually entitled to gratuity payments, on the expiry of their five-year term. For the 2016 financial year, gross emoluments, as reflected under note 29, includes their gratuity payments, which were effected during December 2016. Thus, it is misleading to consider these as salary increases, as you have called them in your question.
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