Friday 14 May 2021
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We can’t borrow ourselves out of this economic mess – analyst

The latest ballooning of government’s debt to the point of going beyond the self-imposed target of keeping it within a 35% ceiling has exposed government’s failure to walk the talk and deliver on its promises.
Commenting on this latest revelation, academic and prolific commentator on national affairs, Ndumba Kamwanyah cautioned government against attempting to ‘borrow’ itself out of the ongoing economic mess.
Yet as the economy melted into recession, finance minister Callie Schlettwein was on record stating at every turn that one of the control measures would be to ensure against feeding government’s growing appetite to borrow.
Kamwanyah has rubbished this as having been mere talk, “while they knew exactly what was going on behind the scenes”.
“We should not really be surprised. It is a behaviour that we have known and to some extent the government was warned from various sectors but opted not to listen and I am sure that they knew what they were doing because the minister was clear that they will not go beyond the ceiling.”
That’s an indication that our economy is not doing well. When you find yourself in such a situation you do not behave in a reckless manner to try to solve the problem. You cannot solve the economic situation in that way in this country, by borrowing. You are making it even worse because it is not sustainable,” said the analyst.
Kamwanyah said from the looks of things, government was borrowing to service its past borrowings which funded projects that failed to bring back economic returns.
Government he said, was thus locking itself in a vicious cycle of piling up debt adding that this was a deliberate creation of problems for whatever administration will take over from the current one.
In the interim, economists at Simonis Storm Securities have voiced that they expect government debt to skyrocket further to N$112.3 billion over the medium-term economic framework which is equivalent to 52.3% debt to GDP.
“This is the new normal,” they said before cautioning; “We must seriously contemplate the risk of increasing debt as this could crowd out money that should be channelled to economic development.”
Simonis Storm now expects debt to GDP to increase to 50.4% in 2019/20, before ticking up to 53.1% in 2021/22 as the overall economy remains subdued.
They said that furthermore, the costs for servicing these borrowings are expected to remain elevated breaching the ceiling of 10% to revenue. Schlettwein admitted to having seen the storm looming during a February Statehouse address to President Hage Geingob, Bank of Namibia governor Iipumbu Shiimi and the president of the Deutsche Bundesbank of Germany Jens Weidman.
He however promised that government would take pains to make sure that the debt does not become unbearable.
The minister would not comment on how government was going to do this and rather requested that this publication contact him next week for a comment.
Kamwanyah has told government to be more honest and realistic when dealing with economic issues. “Economics is not politics. In economics you can try to manipulate the facts and reality, but it will eventually catch up with you and that is what is happening. Now we know that it was just a talk.
“So, I think we should urge policy makers to be up-front and tell people what is happening and why do we find ourselves in that particular situation. This will make things difficult and the citizens discontented and not trusting each other,” he opines.
Law-makers have been on record stating that some of the envisaged development projects would be financed by loans from China if need be.
Statistics released last year by the Bank of Namibia through its annual report shows that just over 71% of the long-term loans for 2017 were sourced from China.
Namibia also borrowed from Germany, Tunisia, The United Kingdom, Luxembourg, Germany, British Virgin Islands, South Africa and Poland with most of these loans denominated in the South African Rand, the US dollar, the Chinese Yuan, the Japanese Yen and the British Pound. China has also surpassed South Africa as the country’s best exports destination.
Vehemently defending the Chinese monies last year, Schlettwein trashed allegations that Namibia was falling in a debt trap saying the total debt to China was at N$76.6 billion.
He said, as per the bilateral arrangement between the two countries, Namibia had benefitted from China in grants to the tune of N$1.3 billion, interest free loans at N$302 million and concessional loans worth N$1.7 billion.
“These loans were offered and were provided with mutual understanding between the two governments and contain concessional terms and conditions as opposed to market loans or other borrowing like those provided for by Development Financial Institutions and the bonds market,” the minister said.

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