Windhoek - The Namibian government is not concerned about Moody’s latest downgrade of the economy saying that there is no need to panic as the rating agency did not mention anything new in its reasons.
Last week, Moody’s downgraded Namibia’s long-term non-rand foreign currency bonds from Ba1 sub-investment grade assigned in 2017 with a negative outlook, to a Ba2 sub-investment grade, with a stable outlook.
Moody’s rating came months after another rating agency, Fitch also downgraded the country’s economy.
This is a notch lower than the previous rating, reflecting Moody’s view that the domestic economy remains under recessionary pressures, amidst external shocks arising from the impact of the prevailing severe drought condition and lower sub-regional growth outlook.
In its report, Moody’s highlighted that some key drivers which were the reason for this downgrade. Some of these key drivers are weakening of economic growth which Moody’s expects to contract by 1.5 percent in 2019, against its initial positive growth expectations; reduced ability to stabilise growth in public debt through cutting back on spending, particularly the inability to reduce the high wage bill costs in a low growth environment; the negative impact of temporary factors such as the severe drought in the agricultural sector and the weak growth in the mining sector; and declining national competitiveness relative to global rankings.
Despite this scathing report from Moody’s, Minister of Finance Calle Schlettwein said government reiterates its commitment to a growth-friendly fiscal consolidation and the package of structural policy reforms to support domestic economic activity, improve business confidence, policy certainty and bring about recovery of the domestic economy and sustainable public debt management.
He said as stated in the government’s medium-term policy stance, achieving economic growth, which is the necessary condition for the reduction of public debt, revenue generation, the creation of jobs and the reduction of poverty and inequality was by far the most important objective over the short and the long term.
“In this regard, the government, in collaboration with the private sector, has already commenced with the implementation of growth enhancing measures,” said Schlettwein.
Some of these measures are implementation of an increased development budget by 42.2% as a lever for supporting domestic economic activity.
Another measure is the implementation of the project financing arrangements with the African Development Bank to the tune of R4 billion over the next years for the agricultural mechanisation programme, rail and road infrastructure projects as well as essential public infrastructure projects in the education sector.
“Procurement of these projects have reached an award stage and poised to inject activity and enhance the productive capacity of the economy,” said Schlettwein.
Schlettwein also said that government has increased mobilisation of domestic savings through increased domestic asset requirement from 35 percent of total assets to 45% by December 2018, thus releasing money into the domestic economy to finance investments in the real and services sectors.
Schlettwein said the government was confident that these policy packages would place the economy on a firm positive and sustainable growth trajectory over the medium to long term.
He added that throughout the years, Namibia had demonstrated its ability and resilience to deal with shocks and also to direct policy actions to addressing socio-economic development needs.
“Therefore, remain optimistic that growth prospects will gain traction as the implementation of the adopted measures is scaled-up. The government summons the collective support of all Namibians and call on the private sector and investor community to remain positive and supportive as the economy rebounds to positive growth, thus enabling broad-based socioeconomic development and shared prosperity,” he said.