More than N$114.5 billion of Namibian money was invested in assets in foreign countries in the first quarter of this year, despite Namibia desperately needing cash to fund its own budgetary expenditure.
This situation, revealed exclusively to New Era by Finance Minister Calle Schlettwein, could be seen as a sign of no faith in the country’s fiscal structure.
The figure, provided by the Bank of Namibia, is more than double the N$6.7 billion invested outside the country during the same period last year.
The excessive export of funds has upset Schlettwein, who said that investment managers and brokerage analysts often speak of government being unable to raise funds to finance its budget deficit, while the market appears to snub government-issued bonds and Treasury Bills.
“While the domestic capital market claims to be less liquid to support domestic borrowing, capital continues to flow out of the country unabatedly,” the minister said.
“Certain local capital market investors go as far as being excessively speculative with over-price offers only to claim being overlooked when market diversification provides better avenues for raising capital.”
The finance minister says local auctions in September this year were undersubscribed under the guise of credit having dried up.
Further, he says the concerns raised about the “drying up of liquidity” in the domestic market do not go as far as indicating that capital is still flowing out of the country, in spite of the presence of secure investment instruments such as government bonds and Treasury Bills.
Very much irking Schlettwein are analysts’ comments that government would struggle to raise N$12 billion for expenditure because of the absence of money in the local market. Worsening the situation, analysts say, is government’s limited borrowing capacity as debts continue to grow dangerously towards the ceiling.
Schlettwein’s response is that such comments fall short of recognising the policy actions of the government.
“Government is satisfied that over 60 percent of the deficit financing needs are already met halfway through the budget implementation phase, with the remaining funding to be raised over the remaining calendar year in line with the cash-flow needs,” he says.
Treasury has already commenced with the mid-year budget review to enhance the quality of spending and align the spending proposals to the dynamic macro-economic environment.
The necessary foreign reserves position will be achieved through the execution of the deliberate financing plan and increased benefits from increased exports and domestic productive capacity initiatives.
“There are, to some extent, less liquid assets available to support increased borrowing, especially in the context of expected returns on assets elsewhere,” said Schlettwein.
“This, however, does not take away the fact that substantial domestic capital continues to flow out of the country. If capital can still flow out of the country in substantial sizes, the claim of credit drying up needs to be fully substantiated.”
He maintains that the government will continue to execute the national budget without compromising macro-economic stability and sustainability of fiscal operations.
“The government, therefore, wishes to reassure the public that macro-economic stability, fiscal prudence and sustainability remain key in the conduct of government fiscal policy and economic management.”
“Our policies will remain robust, pro-growth, pro-poor, pro-business and in support of the national development agenda in a dynamic and integrated global economy,” he says.