• Market Watch

Treasury confident Namibia will honour Eurobond

• 3 Days Ago - 2024-07-03 00:00:00

Finance minister Ipumbu Shiimi says Namibia will honour its US$750 million (N$14 billion) Eurobond obligation, which matures in 2025.
Shiimi made the remarks during an appearance on Network Television’s The Agenda, saying Namibia had in the past demonstrated its ability to settle its debt obligations.
To ensure it honours the obligation, Shiimi said the government had been putting money aside to meet its debt obligation.
“This is the first Eurobond that is maturing," he said.
"We had one that we retired in 2021, so that one is fully repaid, so we have experience in repaying our Eurobonds,” Shiimi added.

‘Not default’
To ensure Namibia would meet its debt obligation, the government had in the meantime put savings aside to partially fulfil the Eurobond, while consideration was being given to converting US$250 million of the total into local debt.
“What we have been doing is putting some money aside, and we will continue to do so until the date of repayment. We will pay off some of the Eurobond from the savings we are putting aside; there will be a reminder of US$250 million – that one we are trying to see, should it be converted into a domestic bond, so we can borrow domestically and repay,” he explained.
Shiimi explained that government would assess the path it would follow in due course with regards to converting part of the Eurobond to domestic debt or redeeming it.
“That is a small problem to manage, we will manage to meet the deadline, we will not default on our debt,” Shiimi said.

Debt-reduction strategy welcomed
The redemption of the Eurobond would go towards significantly reducing Namibia’s public debt stock, in line with international best practices, economist Klaus Schade said.
“The redemption of a large chunk of the Eurobond will reduce the debt-to-GDP [gross domestic product] ratio to some 56%, which is below the international threshold of 60%. Subsequently, interest payments will be reduced, as well as the risk exchange rate fluctuations pose to overall debts and interest payments,” he said.
Public debt stands at N$165.8 billion – or 60.1% of GDP.
Going forward, Schade implored the government to issue debt in the domestic currency to ensure local financial institutions and Namibian-based individual investors could benefit.
“Ideally, the remaining Eurobond amount is financed on the domestic market since it generates interest income for mainly domestic financial institutions and individuals investing in government bonds and treasury bills. However, interest rate levels are higher on the domestic market than on the international market and there could be liquidity constraints. Government needs to be careful not to crowd out the private sector from borrowing,” Schade said.