Windhoek-The African Development Bank (AfDB) has availed more than N$3 billion to Namibia, as a loan to finance the country’s development programme this year, specifically focusing on economic governance and improving competitiveness.
The continental development bank announced the financing package this week, saying while there has been economic progress over the last two decades there is an urgent need to boost the country’s public finance management and business environment.
The financing would “support the government’s ongoing bold structural reforms aimed at driving long-term job creating growth and reducing income equality,” according to senior vice-president Charles Boamah, who presided over the AfDB Board meeting that approved US$226.5 million (N$3 billion) to finance Namibia’s Economic Governance and Competitiveness Support Programme (EGCSP).
Boamah said the board was satisfied with the Namibian government’s strong commitment to the implementation of reforms.
The loan is part of N$10 billion that AfDB has advanced to Namibia for a two-year period. Of this amount, N$6 billion would go towards operational financing and would be dispensed in equal tranches over the period, while N$4 billion is set aside for infrastructure financing.
Finance Minister Calle Schlettwein was emphatic yesterday that this was not an additional loan over and above the budget and was also not a budget support facility that enhances the budget as such.
“Rather it is a financing mechanism to partially fund the budget deficit as projected in the Medium Term Expenditure Framework,” he said.
He also said the loan facility would not result in additional debt above the budgeted debt levels. The loan term for this facility is 15 years and includes a three-year grace period.
It would be serviced on a three-month Johannesburg Interbank Average Rate (Jibar), a local rate, as opposed to often-used London Interbank Offered Rate (Libor), plus a margin of about 80 basis points.
“The rate is competitive and compares favourably with the cost of financing for similar instruments in the domestic market,” Schlettwein said.
AfDB has said the facility “would support the strengthening of public financial management and improve the quality and efficiency of public sector spending, while laying a solid foundation for industrialisation through support to critical business environment reforms.”
The funding initiative is AfDB’s maiden policy-based operation in Namibia and the first of two programmatic series for the 2017/18 and 2018/19 fiscal years.
The bank noted that Namibia registered one of the highest average growth rates in Africa over the past 20 years and has made some good progress in reducing poverty.
“However, more progress is needed to further reduce unemployment, and income inequality. These challenges are compounded by bottlenecks in public financial management and the business environment, which limit the pace of industrialisation and economic diversification,” the bank noted.
In 2016, Namibia recorded a sharp slowdown in real gross domestic product (GDP) from 5.3 percent in 2015 to 0.2 percent. As a share of GDP, the fiscal deficit at 8.3 percent, the current account deficit at 13.7 percent, and public sector debt at 39.8 percent, had also markedly increased, while international reserves at 2.8 months of imports were below the international benchmark of three months, noted the bank in the statement issued.
Guided by Vision 2030, the National Development Plan, the Harambee Prosperity Plan and other sector policies and strategies, government has embarked on fiscal consolidation and wide-ranging public financial management and business environment reforms to address these challenges and these are beginning to yield positive results, the bank noted.
“The AfDB in collaboration with other development partners, will continue to support the government’s bold steps geared towards addressing the country’s short, medium and long-term development challenges,” it said.