AfDB provides African solutions to African problems

By Tiri Masawi

Windhoek – The African Development Bank (AfDB) is proving a vital cog in providing affordable and sustainable lending options and is also providing easy financial solutions to African problems to member states, Namibia Minister of Finance Calle Schlettwein has said.

He was commenting on Namibia accessing a R10 billion loan facility from the AFDB to finance the country’s six percent budget deficit last week. Namibia plunged into a budget deficit in the year 2014/2015 when it heightened expenditure through the Targeted Intervention Programme for Employment and Economic Growth (Tipeeg) programme meant to stimulate employment creation.

“The AfDB, as the African Development Finance Institution, is established to finance developmental and socio-economic needs for its members. The envisaged combined total amount of the operation over a two-year period is up to N$10 billion, to be split in a ratio of 60:40 for Program-based Operation supporting the general budget deficit financing and for targeted financing of development projects respectively.

“In respect to the Programme-based Operation financing, the total combined amounts for two years is N$6.00 billion, to be equally split into equal tranches of N$3 billion each over the two-year period. Of course, deficit financing includes some of the development spending which supports infrastructure development,” Schlettwein said

Since then that country has been battling to close the gap amid a ballooning local debt and a rather consumptive civil service which gulps more than 40 percent of total expenditure

Namibia received the shot in the arm at  when most African Governments have been heavily relying on the Bretton woods institutions for financing, which in most cases comes with stringent conditions and heavy interest.

While Namibia has been on the international market before to raise funds through floating investment bonds on the Johannesburg Stock Exchange this is the first time the that country’s treasury has engaged a multilateral lending institution to finance budget.  In the past the AfDB has provided financing to the Namibian Ports Authority for the expansion of the port facilities and also the expansion of the bulk fuel storage facility at Walvis Bay.

Schlettwein also added that the Namibian Government will continuously engage the African Development Bank in future on set projects and programmes.

“N$4 billion that will support infrastructure financing is significant from the point of view of supporting long-term economic growth and job creation objectives. The details of the specific split across the infrastructure project pipeline will be developed in interaction with Offices/Ministries and Agencies concerned as well as with the AfDB,” he said. Namibia received a R10 billion loan facility from the AfDB to finance their budget needs and also drive infrastructure development projects including rail rehabilitation.

According to Schlettwein Namibia also opted to engage the AfDB as it is providing the loan in Rand terms which will go a long way in waiving the forex exchange risks on repayment cost.

“The envisaged combined total amount of the operation over a two-year period is up to N$10 billion, to be split in a ratio of 60:40 for Program-based Operation supporting the general budget deficit financing and for targeted financing of development projects respectively.

In respect to the Programme-based Operation financing, the total combined amounts for two years is N$6.00 billion, to be equally split into equal tranches of N$3 billion each over the two-year period. Of course, deficit financing includes some of the development spending which supports infrastructure development,” he said.

He added that, “The N$4 billion that will support infrastructure financing is significant from the point of view of supporting long-term economic growth and job creation objectives. The details of the specific split across the infrastructure project pipeline will be developed in interaction with Offices/Ministries and Agencies concerned as well as with the AfDB.

“Let me also state, right at the onset, that this is not an additional loan over and above the budget and Medium-Term Expenditure Framework. It is also not a budget support facility that enhances the budget per se. rather, it is, as I have stated, a financing mechanism to partially fund the budget deficit as projected in the budget and MTEF.

The Programme-based Operation alone will thus finance about half of the budget deficit this year,” he said.

May 2017
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