MOODY’S SAYS MAY CHANGE NAMIBIA’S RATING OUTLOOK TO STABLE IF DEBT LEVEL DECLINES

WINDHOEK-- International rating agency Moody's Investors Service says it may change its outlook on Namibia's sovereign rating to stable if the government commits to fiscal consolidation which results in a declaration of debt accumulation and an eventual decline in debt levels.

In its latest annual report on Namibia, entitled "Government of Namibia -- Ba1 negative, annual credit analysis", the agency Namibia's sovereign rating was susceptible to a further tightening of domestic funding conditions, which could be related to persistent fiscal slippages and would raise debt servicing costs.

Last year, Moody's downgraded Namibia's rating to Ba1 because of erosion in the country's fiscal strength and increasing debt burden and risk of renewed government liquidity pressures in the short term. It also attributed the downgrade to limited institutional capacity to manage shocks and address long-term structural fiscal rigidities.

Moody's indicated that the Ba1 negative credit profile reflected the country's small and relatively diversified economy and its moderate but gradually improving growth prospects. This, it said, was done over the medium-term set against rising public debt levels and external vulnerabilities.

Moody's further expected real gross domestic product (GDP) growth of 0.9 per cent in 2018 and 2.1 per cent in 2019, although the moderate average real GDP and high level of wealth are counterbalanced by growth volatility linked to commodity exports.

"The economic recovery hinges on continuing growth in agriculture and mining, as well as gradually improving manufacturing, which should offset contraction in the construction sector," the report said.

Moody's further indicated that it would likely downgrade the rating if fiscal consolidation were to fail to contain rapid public sector debt accumulation. "A sustained decline in foreign currency reserves to below three months of import cover, increased funding pressure reflecting reduced market appetite for government securities, leading to a material increase in borrowing costs, or both, would also put downward pressure on the rating," the agency warned.

Source: NAM NEWS NETWORK