Namibia: Govt Rush Over N$2 Billion Loan

THE Ministry of Finance is pulling all the stops to meet conditions for the government to qualify for a N$2,5 billion loan from the African Development Bank to fund the national budget deficit for this financial year.

The loan is part of a N$10 billion funding package approved in 2017, which is meant to breathe life into the country's ailing economy.

The Namibian understands that the money is to support the implementation of the government's short-term development agenda, which aims to "accelerate inclusive growth and sustainable development by preserving macroeconomic stability, and addressing the challenges of a lack of diversification, high unemployment, and income inequality".

The Namibian understands that the ministry plans to submit the loan request for board approval this month.

Sources say the rush to meet the conditions for the loan explains why the government appointed deputy Bank of Namibia governor Ebson Uanguta on secondment to head the Namibian Revenue Agency (Namra) in October.

Namra has failed to get off the ground since a law establishing it was passed last year. Uanguta will be there for six months until a new commissioner is appointed.

The government has been drawing from the N$10 billion loan since 2017. So far, the government has received N$6 billion from that loan.

The N$2,5 billion is part of the leftover tranche that the government wants to use on railway upgrades, as well as building schools and green schemes. Some projects are already tainted with suspicion of massive corruption.

Conditions attached to the loan means Namibia needs to fulfil certain targets before it gets the N$2,5 billion to fund its budget.

A number of conditions have not been met yet.

These include starting-up the Namibian Revenue Agency, the implementation of the Public Enterprises Governance Act, and a public enterprises transformation strategy approved by Cabinet.

Namibia also has to ensure that it has an operational SME financing facility which is state-funded, and that a special economic zone policy is approved by Cabinet.

A few months ago, the Development Bank of Namibia (DBN) opened its Small and Medium Enterprise (SME) Centre, which is aimed at bridging the financing gap left by the collapse of the SME Bank.

A Cabinet source said the special economic zone policy aimed at replacing the contentious export processing zones - which has in recent months driven a wedge between the finance ministry and the industrialisation ministry - has not yet been approved by Cabinet.

The audit of the civil service payroll, according to ministerial insiders, has, however, been completed.

A finance ministry source told The Namibian last month that the country needs the African Development Bank loan to keep government afloat.

Last month, the finance ministry went as far as sending a delegation - spearheaded by the ministry's asset and debt management deputy director Marten Ashikoto - to the African Development Bank to negotiate in getting the loan, despite some conditions being outstanding.

"The African Development Bank is serious with those triggers. The moment we don't achieve them, they will not approve our application," a senior government official familiar with the loan application process said.

DECEMBER DEADLINE

This is not a new practice, according to finance minister Calle Schlettwein. He told The Namibian yesterday that the delegation was sent to negotiate terms and conditions of the loan to ensure that the loan agreement conforms to the country's statutory requirements.

He downplayed the impact of the triggers on the loan application.

"The triggers set for the loan disbursement are the reform pillars identified nationally. They are not set unilaterally by the bank," the minister stated.

He said the loan request will only be submitted to the board when all the triggers have been met.

Schlettwein explained that a large part of the budget shortfall of about 75% (around N$6,1 billion) will be funded through the issuance of debt instruments in Namibia if the African Development Bank does not grant the loan.

"Only 25% (N$2 billion) is expected to be sourced from AfDB. However, should there be a delay in disbursements, the domestic capital market has adequate liquidity, and the government also has sufficient cash reserves to meet the funding needs of the budget, as it has done over the past eight months," Schlettwein said.

There is, however, evidence that the finance ministry is desperate.

Finance executive director Ericah Shafudah wrote to the public enterprises ministry last month, asking for an update on the status of the Public Enterprises Governance Act.

She indicated that the disbursement of the loan would be adversely affected if all set conditions were not met.

"The bank requires the submission of evidence of fulfilment of prior actions before the disbursement of this funding. Subject to a satisfactory review of the evidence submitted, the loan request will be submitted to the board for approval in December 2019," Shafudah said in the letter.

The public enterprises ministry is yet to enforce the new law, although it has been adopted by parliament.

The Namibian understands that none of the conditions can be achieved if the new law is not in operation.

Public enterprises minister Leon Jooste on Tuesday said: "All this will take place early next year, and we are on track".

"We are in discussions with the Public Service Commission to finalise our permanent structure; we have been operating under a temporary structure up till now. This is required to enable us to implement the act," he stated.

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