The high public sector payroll, budget deficit, growing debt burden and the impact of COVID-19 have all played a role in Namibia’s recent Ba2 downgrade to Ba3. Namibia is now three notches below the investment level
“Implementing the government’s fiscal consolidation plans will invariably prove difficult in a low growth environment. Especially as the government seeks to reduce the large and politically challenging public sector wage bill. In addition, very high gross borrowing requirements, given the state’s continued reliance on short-term financing, indicate a significant liquidity risk, ”Moody’s said.
“The downgrade will hit Namibia hard at a time when the country will have to take out credit, which will now be very expensive due to the downgrade,” said Dr. Omu Kakujaha-Matundu, lecturer in economics at the University of Namibia (UNAM), in a conversation with the AZ sister, Namibian Sun.
According to Kakujaha-Matundu, the downgrade is a slap in the face. The reasons for the downgrade were “less controversial”, but the proposed remedial measures could “generate enormous economic costs”. The proposed austerity measures would result in an “economic catastrophe”. “How are you supposed to cut government spending when, given the devastation caused by COVID-19, that’s the only remaining stimulus for economic recovery?”
Finance Minister Iipumbu Shiimi responded yesterday with the words: “We are fully aware of the serious negative effects of COVID-19 on the economy. This pandemic has significantly reversed the budgetary consolidation successes achieved over the past five years. ”
Read the full report in the Market Watch insert.
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