With a significant portion of government debt due for repayment, government is set to fork out close to N$23 billion servicing its debts in 2025 alone, including the maturing US$750 (N$14.3 billion) Eurobond due on 29 October 2025 which will be the largest single day debt maturity in the history of the country.
According to Simonis Storm, debt servicing metrics, although stabilizing, remain above the desired benchmark of 10% of revenues.
Debt to be repaid in 2025 includes the GC24 of N$2.59 billion maturing on 15 October 2025; GC25 of N$4.07 billion maturing on 15 April 2025; GI25 of N$1.96 billion maturing on 15 July 2025 and the Eurobond of N$14.11 billion maturing on 29 October 2025.
Essentially, government will commit to redirect part of the increased revenue towards the sinking fund to manage the rollover risk and contain increases in future debt obligations.
“The government is committed to redirecting part of the increase in revenues towards the sinking fund to manage the rollover risk and contain future debt service obligations. Specifically, at least N$3.5 billion during FY2024/25 and some N$2.0 billion in FY2025/26 of the Southern African Customs Union (SACU) receipts will be transmitted to the sinking fund to retire two thirds of the US$750 million Eurobond due on 29 October 2025,” said Simonis Storm.
Beyond 2025, government will also need to repay the GC26 of N$6.05 billion maturing on 15 April 2026; JSE bond (NAM04) of N$335 million maturing on 01 August 2026 and the GC27 of N$5.01 billion maturing on 15 January 2027.
In the FY2024/2025 Namibian budget, presented by Finance Minister Iipumbu Shiimi last week under the theme “continuing the legacy of His Excellency Dr. Hage G. Geingob by caring for the Namibian child”, external debt is estimated to increase by N$2.4 billion in FY2024/25 and decline in FY2025/26 because of the partial Eurobond redemption.
On the external debt portfolio, bilateral arrangement for external project financing, negotiations with the African Development Bank (AfDB) have been concluded, securing a total funding of N$3.7 billion for the upgrading of the railway line.
“The budget deficit for FY2024/25 is expected to improve to 3.2% of GDP. Public debt is estimated at N$165.8 billion or 60.1% of GDP during FY2024/25, a reduction from the previous year. The total debt stock stood at N$151.3 billion, equivalent to 61.3% of GDP. Public debt growth has stabilized, and debt metrics have started declining, driven by strong growth in nominal GDP,” Shiimi said.
The government has budgeted N$12.8 billion for meeting debt servicing obligations, which includes interest payments. This amount is equivalent to 14.2 percent of revenues and 4.7 percent of GDP. Public debt is projected at N$165.8 billion or 60.1% of GDP for FY2024/25, with measures in place to ensure debt sustainability.
Shiimi budget aims to address the country’s economic challenges while ensuring responsible financial management. The budget focuses on stimulating economic growth, enhancing infrastructure, and supporting social welfare. However, it must also navigate the complexities of maintaining fiscal discipline.
“Revenue collections stood at N$72.0 billion, a collection rate of 90.6% over the first 10 months of the financial year, significantly higher than the historical average. Corporate income tax, VAT, withholding tax on services, and tax on royalty showed strong collections. Total revenues are estimated at N$90.4 billion for FY2024/25, an increase of 11.5% from the previous year. Revenue growth over the MTEF is projected to average 5.0%, reaching N$93.6 billion by FY2026/2,” Shiimi said.
Non-interest expenditure at the end of January 2024 stood at N$54.1 billion, equivalent to 70.7% of the revised expenditure numbers. The spending rate is below historical levels, indicating no significant expenditure overruns expected by the end of the financial year. Total expenditure for FY2024/25 is projected at N$100.1 billion, an increase of 12.4% from the previous year.
The operational budget is estimated at N$74.6 billion, representing an increase of 8.8 percent over the FY2023/24 estimates. The increase in operational expenditure largely reflects the 5.0 percent adjustment in the civil service wage bill at a cost of N$1.7 billion to guard against the erosion of purchasing power. The wage adjustment is effective from 01 April 2024. The development budget has been increased significantly by 58.1% to N$12.7 billion, which includes N$3.2 billion in grant-funded and loan-funded projects. This budget allocation is equivalent to 4.6% of GDP, an improvement from previous years.