Namibia’s credit rating sound

NAMIBIA is well placed to weather the economic storm caused by the global financial meltdown and the recent sharp decline in the value of the Namibian dollar, according to the latest Fitch Ratings report issued on Friday.

The international credit rating agency said Namibia’s financial position has improved with the economy showing a stronger growth on account of expansion in the mining sector and a strengthening balance-of-payments. “These developments leave the country well-placed to manage the fallout from the recent sharp depreciation of the South African rand – to which the Namibian dollar is pegged – and the fall in commodity prices as a result of the global liquidity crunch and economic slowdown,” Fitch said in a statement.The rand hit a new six-and-a-half year low of 11.88 to the US dollar on Wednesday.The rand has lost over 40 per cent of its value this year against the dollar, and has been especially hammered in the past two weeks as fears grow that the global economy will slide into recession.On Friday, the South African currency closed just above 10 rand to the US dollar.Fitch is one of three top international credit rating agencies, which assign domestic and external ratings at borrower’s request.Namibia’s balance-of-payments position has been boosted by strong exports, South African Customs Union (Sacu) revenues, fiscal discipline and foreign direct investment.Fitch Ratings also credits Namibia for its low external debt and a healthy high balance-of-payments, despite a high net outflow of capital.The high balance-of-payments, Fitch said, has accorded Bank of Namibia the opportunity to pursue a more “flexible” monetary policy than its neighbour South Africa.”The country’s strong net foreign assets position, which once again rose to US$4 billion in 2007 due to the increase of portfolio assets and official reserves, is also a credit strength.”The improvement in Government finances has given the country scope to “significantly increase development spending” over the medium term.And this Fitch said will help underpin growth and competitiveness.However, the challenge for the country is deploying domestic savings for long-term investments.The Government has introduced legislative changes to mobilise domestic savings for local investments, but these yielded little impact.”Regulatory measures to tighten domestic investment requirements, aimed at reducing the outflow of capital, have started to be implemented, although reforms to encourage the development of domestic capital markets that would improve the effectiveness of the regulatory measures, have progressed more slowly,” Fitch’s report said.Changes to Regulation 28 of the Pension Funds Act for pension funds to invest a minimum of five per cent of their funds in unlisted companies and was supposed to be started this year, are still being debated in conference rooms.In Fitch’s view, investment underway in the mining sector and public infrastructure could boost the medium-term growth, strengthen Government revenues, expand export earnings and strengthen the balance-of-payments sufficiently to put upward pressure on the ratings.”These developments leave the country well-placed to manage the fallout from the recent sharp depreciation of the South African rand – to which the Namibian dollar is pegged – and the fall in commodity prices as a result of the global liquidity crunch and economic slowdown,” Fitch said in a statement. The rand hit a new six-and-a-half year low of 11.88 to the US dollar on Wednesday.The rand has lost over 40 per cent of its value this year against the dollar, and has been especially hammered in the past two weeks as fears grow that the global economy will slide into recession.On Friday, the South African currency closed just above 10 rand to the US dollar.Fitch is one of three top international credit rating agencies, which assign domestic and external ratings at borrower’s request.Namibia’s balance-of-payments position has been boosted by strong exports, South African Customs Union (Sacu) revenues, fiscal discipline and foreign direct investment.Fitch Ratings also credits Namibia for its low external debt and a healthy high balance-of-payments, despite a high net outflow of capital.The high balance-of-payments, Fitch said, has accorded Bank of Namibia the opportunity to pursue a more “flexible” monetary policy than its neighbour South Africa.”The country’s strong net foreign assets position, which once again rose to US$4 billion in 2007 due to the increase of portfolio assets and official reserves, is also a credit strength.”The improvement in Government finances has given the country scope to “significantly increase development spending” over the medium term.And this Fitch said will help underpin growth and competitiveness.However, the challenge for the country is deploying domestic savings for long-term investments.The Government has introduced legislative changes to mobilise domestic savings for local investments, but these yielded little impact.”Regulatory measures to tighten domestic investment requirements, aimed at reducing the outflow of capital, have started to be implemented, although reforms to encourage the development of domestic capital markets that would improve the effectiveness of the regulatory measures, have progressed more slowly,” Fitch’s report said.Changes to Regulation 28 of the Pension Funds Act for pension funds to invest a minimum of five per cent of their funds in unlisted companies and was supposed to be started this year, are still being debated in conference rooms.In Fitch’s view, investment underway in the mining sector and public infrastructure could boost the medium-term growth, strengthen Government revenues, expand export earnings and strengthen the balance-of-payments sufficiently to put upward pressure on the ratings.