(The following statement was released by the rating agency)
Link to Fitch Ratings' Report: Namibia - Rating Action Report
LONDON, September 02 (Fitch) Fitch Ratings has revised Namibia's
Negative from Stable while affirming the Long-Term Foreign and
Issuer Default Ratings (IDR) at 'BBB-'. The issue ratings on
unsecured foreign- and local-currency bonds are also affirmed at
Country Ceiling is affirmed at 'BBB' and the Short-Term Foreign
Currency IDRs at 'F3'.
Fitch has also revised the Outlook on Namibia's National Rating
on the South
African scale to Negative from Stable and affirmed the Long-Term
'AA+(zaf)'. The issue ratings on Namibia's bonds with a National
been affirmed at 'AA+(zaf)'.
The revision of Outlook to Negative reflects the following key
and their relative strength:
Namibia's budget deficit widened sharply to 8.3% of GDP in
fiscal year 2015/16
(FY15, which runs from April 2015), well above the government's
5% target and
the worst on record. The deficit has worsened progressively from
0.1% in FY12 to
3.4% in FY13 and 6.4% in FY14, and is well above the 'BBB'
category median of
2.7%. The overshoot in the deficit in FY15 primarily reflected
weaker-than-expected revenues from domestic sources, including
company tax and
lower-than-expected income tax.
The government is targeting a narrowing of the deficit to 4.3%
of GDP in FY16.
Outturns for the first few months of the current fiscal year
has grown strongly. The Ministry of Finance is exerting greater
expenditure at all ministries and is cutting overtime, travel
spending. However, meeting deficit targets will prove
amid a secular decline in revenues from the Southern African
(SACU), which the government projects will fall under 7% of GDP
by 2018 from
12.4% in 2014.
Gross general government debt (GGGD) increased sharply to 38.2%
of GDP at
end-2015 from 23.2% at end-2014, albeit partly due to an
increase in government
deposits following the issue of a USD750m Eurobond and exchange
depreciation. Fitch forecasts GGGD to rise further to 39% of GDP
at end-2016. It
is now roughly in line with the peer median of 41%, having
previously been a
rating strength. We expect government guarantees to peak at 5.8%
of GDP in FY16,
below the government's 10% limit.
Namibia's current account deficit deteriorated to 14.1% of GDP
in 2015, from
8.9% in 2013, and well above the 'BBB' category median of 1.3%.
However, much of
the deficit has been financed by external borrowing from parent
companies, reducing external vulnerabilities.
Merchandise exports should start to grow in the coming years as
projects come online. Moreover, imports should fall as capital
decreases (data for 1H16 already show a slowdown in all import
Fitch expects the current account deficit to narrow to 6.9% of
GDP by 2018.
Foreign exchange reserves increased to around 3.4 months of
import cover by
mid-2016, although this is still below the peer median of 5.7%.
KEY RATING DRIVERS
Namibia's 'BBB-' ratings also reflect the following factors:
Growth performance remains a key rating strength. The economy
grew 5.7% in 2015,
and Fitch expects it to expand 4.4% this year (BBB median
2.5%). New mining capacity is rapidly coming online, notably the
mine, which is expected to begin production by end-2016, and is
expected to add
around 5% to GDP. The continued strong growth performance is
impressive given the continued drought, weak performance in key
(notably South Africa and Angola) and higher interest rates.
A major reform, the New Equitable Economic Empowerment Framework
announced by the President at the beginning of the year and
seeks to increase
the involvement of previously disadvantaged citizens in the
While lacking in details, it is likely that the law will be
parliament (although the Supreme Court might end up blocking
it). This has
caused some unease in the business community and could slow down
investment in manufacturing and services.
The rapid growth in house prices in recent years has created
certain risks for
the banking sector. However, given the introduction of macro
and falling demand from Angola, it is likely that the housing
market will cool
from here, with a slowdown at the top end of the market already
quality is fairly good, with non-performing loans (NPLs) at
around 1.6% of total
loans at end-2015. The system's capital position is sound, with
a risk- weighted
capital ratio of 14.3% in December 2015.
Namibia's ratings are supported by a track record of political
slightly stronger governance indicators than rated peers, a net
creditor position, financing flexibility enhanced by access to
the deep South
African capital markets and a liquid banking system. However, it
has a fairly
low level of GDP per capita and economic development, high
inequality, and is vulnerable to shocks to commodity prices.
SOVEREIGN RATING MODEL (SRM) and QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Namibia a score equivalent to a
rating of 'BB+'
on the Long-Term Foreign Currency IDR scale.
Fitch's sovereign rating committee adjusted the output from the
SRM to arrive at
the final Long-Term Foreign Currency IDR by applying its QO,
relative to rated
peers, as follows:
Macro: +1 notch, to reflect strong medium-term growth potential
macroeconomic policies consistent with its exchange rate regime.
Future developments that could result in a downgrade include:
- A failure to narrow the fiscal deficit leading to continued
rise in the
government debt/GDP ratio.
- Failure to narrow the current account deficit or significant
- Deterioration in economic growth, for example, due to a
worsening of the
Future Developments that could result in the Outlook being
revised to Stable
- A narrowing of the budget deficit consistent with a
stabilisation of the
government debt/GDP ratio.
-A marked improvement in the current account balance and
increase in foreign
Fitch assumes that the currency peg agreement with South Africa
will remain in
place and the government will pursue prudent macroeconomic
Global assumptions are consistent with Fitch's 'Global Economic
including a subdued outlook for commodity prices.
Federico Barriga Salazar
+44 20 3530 1242
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
+852 2263 9830
+44 20 3530 1176
Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530
Additional information is available on www.fitchratings.com
Country Ceilings (pub. 16 Aug 2016)
Sovereign Rating Criteria (pub. 18 Jul 2016)
Dodd-Frank Rating Information Disclosure Form
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS
here. IN ADDITION,
ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS,
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE
FROM THE 'CODE OF
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES.
DETAILS OF THIS
SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH