By Business Editor
THE African Development Bank (AfDB) is increasingly becoming a strong development partner of choice in Namibia.
The proposed loan extended to Namibia by the AfDB will be denominated in South African rand (ZAR), which will help address Namibia’s financing needs, as it implements its fiscal consolidation plan.
The loan will also improve economic governance management, inclusive of private sector development and State-owned enterprises reforms, and impart industrialisation through agrobusiness processing and rail road infrastructure.
The bank commended Namibia for taking steps to curtail the rising public debt burden. The loan will help to improve the composition of Namibia’s public debt structure, by enabling the government to secure substantial funding at lower lending rates, with zero exchange rate risk and at a longer maturity than Namibia would otherwise be able to access elsewhere.
The type of instruments, and the structuring of bank’s ongoing and planned support to Namibia, responds to both emerging and long-term development challenges, as indicated in its Harambee Prosperity Plan and the Fifth National Development Plan (NDP5).
This is further demonstrated in the bank’s added value and relevance in the country, through its High 5s on energising, industrialising, feeding, integrating and improving the quality of life of Africans, including Namibians.
The provision of the loan is especially important, in view of the prevailing liquidity constraints in the Namibian domestic market, the long-term tenure of the bank’s lending in South African rand, packaged with risk mitigating features on exchange rate cover positions, and the bank emerging as a competitive lender of choice for public and private sector borrowing to Namibia.
The bank’s lending not only mitigates exchange rate risks, but also helps extend the maturity profile of the government debt. The Namibian government preference for the bank’s ZAR denominated instruments is also aimed at bolstering Namibia’s international reserves position, which should be welcomed, in view of the lower foreign reserves, and as a form of assisting the current account, balance of payments position and effecting proper monetary management of the economy.
The bank’s support to the Republic of Namibia is done under the Country Strategy Paper (CSP) 2014-2018 and is provided for within the framework of two pillars: (i) Infrastructure development – energy, transport and water, and (ii) Private sector development – improving the business environment and skills.
The Minister of Finance, Calle Schlettwein, has commended that the Strategy Paper was approved without a lending programme, on the understanding that ongoing discussions on investment needs, project scoping, financing gaps and potential bank support to strategic key areas of development needs, would take place on an agreed basis with AfDB.
Since then, the approval of the CSP Country Dialogue and the recent loan approved has focused on demonstrating the economic governance and competitiveness and value-addition of its financing instruments and technical assistance, to support Namibia’s national development plan for addressing structural constraints to job creation, economic growth, poverty reduction and reduced income equality.
Namibia is the only creditworthy country in Africa, which is investment grade positive and does not have a junk status (see table to left).
This gives significance to its sustainable lending limit and Namibia’s current preference for long-term borrowing in ZAR gives the AfDB a competitive advantage, and an opportunity for Namibia to attend to its developmental needs in the short to medium-term.
It also gave AfDB an opportunity to grow its portfolio worldwide, with reduced global risk exposure. The loan granted to Namibia represents the best deal made by AfDB, under its policy-based operations and is clearly a relevant, developmentally focused, policy-oriented project, specifically targeted to infrastructure and public and private sector growth, in areas of economic governance, which propels Namibia to higher competitiveness.
Confidente. Lifting the Lid. Copyright © 2015