Moody

Namibia says it is concerned with Moody’s Investor Services decision to downgrade the country’s international credit ratings because there was no in-depth assessment and consultations.

Moody’s downgraded Namibia’s credit rating from Baa3- to Ba1 but maintained the negative outlook.

In a statement Friday, finance minister Calle Schlettwein said Moody’s latest downgrade accords Namibia’s international debt issuances junk status.

Moody’s stated that they downgraded Namibia credit ratings because the country’s fiscal strength has been eroded and there is a limited institutional capacity to respond to shocks as well as renewed risk of liquidity pressures.

The agency noted that the public debt burden had risen rapidly over the past several years, from the low level of 26 percent of GDP when it first assigned the rating in 2011 to the current 42 percent.

“The high share of debt in foreign currency (other than rand) makes the fiscal position vulnerable to a further rapid deterioration in the event of an exchange rate shock, as was the case most recently in 2015,” Moody’s said.

It further noted that other sources of potential deterioration is unexpected shortfalls in the Southern African Customs Union (SACU) revenues relative to forecasts as well as expenditure over-runs in the context of upcoming ruling party SWAPO leadership elections (end-2017) and presidential elections (2019).

Schlettwein, however, said Namibia does not agree with Moody’s rating because the agency reaffirmed the country’s credit rating at the investment grade notch of Baa3- and revised the rating outlook from “stable” to “negative”, reflecting some risk factors which need to be addressed.

The minister said Moody’s also lowered Namibia’s local currency bond and bank deposit ceilings to A2 from A1; the foreign currency bank deposit ceiling to Ba2 from Baa3; and the foreign-currency bond ceiling to Baa2 from A3.

“While these ratings still reflect investment grade, we also do not think that domestic economic conditions warrant a downgrade at this point,” he said.

Schlettwein said Namibia had taken steps to address these risk factors pointed out by Moody’s in Dec. 2016.

He argued that although credit ratings change with the changing conditions in the country, Namibia’s opinion is that this should have been done after an in-depth assessment and engagement with the government.

“This recent rating acting by Moody’s relied merely on an exchange of emails on a single item, that of outstanding invoices and how Government is planning to settle them. This is highly regrettable,” Schlettwein said.

He also argued that the review was done too early – that is four months into the 2017/18 budget implementation – and as such is based on a “very narrow base and may contain speculative conclusions on the performance of the budget for the whole financial year”.

“The process followed by Moody’s is, therefore, not systematic as we are busy developing the mid-year budget review and better-informed ratings action and effective country assessment could have benefited from the mid-year budget review planned for October 2017,” the minister said.

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Source: Xinhua/Newsghana.com.gh