By Hilary Mare
ACCORDING to Simonis and Storm Securities, Namibia’s total debt stood at N$160.5 billion at the end August 2017, reflecting a year-on-year (y-o-y) growth of 7.9 percent and a month-on-month m-o-m) growth of 1 percent.
The monthly increase in overall debt is evident in the corporate and government debt components – 2.1 percent and 1.6 percent, respectively.
“Government continues to increase debt, albeit at a slower pace, while corporate debt was mainly driven by increases in borrowing through overdrafts, mortgages and other loans and advances,” Indileni Nanghonga, a trainee analyst at Simonis and Storm Securities, said.
Subsequently, household unsecured lending increased by 13.3 percent y-o-y in August, compared to the 7.8 percent y-o-y growth recorded in the prior year.
“If this trend continues, we are worried that it might pose significant risks to the banking sector. Our strong view is that Bank of Namibia should cut interest rates by another 25 basis points at its meeting on 25 October 2017. Bank deposit rates and the FRA (Forward Rate Agreement) curve points to another rate cut before the end of the year, coupled with declining Treasury Bill (TB) rates (12 month TB is at 7.9 percent). We believe that another interest rate cut will abate some pressure from the consumer, especially in terms of debt service costs,” explained Nanghonga.
However, Private Sector Credit Extension (PSCE) increased at a slower pace of 6.2 percent y-o-y at the end of August 2017, compared to 10.9 percent recorded in the prior year.
“This was the slowest growth ever recorded in PSCE. Slowing PSCE can be attributed to the sluggish appetite for credit by households, specifically through mortgage loans and instalment credit facilities. Furthermore, household debt increased by 6.3 percent y-o-y at the end of August 2017, the lowest growth since a 6.1 percent y-o-y growth seen in March 2010. The slowing trend is also evident in business debt growth. In addition, continuous contraction in instalment credit remains a drag to an already struggling motor industry, as well as the economy as a whole,” added Nanghonga
Confidente. Lifting the Lid. Copyright © 2015