Fitch Ratings Rates Namibia’s Development Bank as Outlook Stable

Opinion Piece, By Josef Kefas Sheehama

Fitch Ratings has affirmed DBN’s Long-Term Issuer Default Ratings (IDR) at ‘BB-‘ and it’s National Long-Term Rating at ‘AA+. These credit ratings cover the widest range of credit risk factors and have no limitations.

The Namibian Development Bank (DBN) is the country’s flagship and largest policy bank, contributing to economic and social development. Its strategy is in line with national development objectives and heavily influenced by Namibian government policy, with close oversight from its shareholder, the Ministry of Finance (MoF). DBN focuses on financing infrastructure, development, and large industrial projects in strategically important sectors, as well as, to a lesser extent, small and medium-sized businesses. This is a strong endorsement of the Development Bank’s financial strength and reputation, as well as the extraordinary support of its shareholders. Fitch emphasized the importance of the Bank’s public mandate, governance, and high-quality risk management. Based on its strong financial position, the Bank has launched a number of initiatives for Namibia, including assisting businesses in their recovery from the Covid-19 pandemic. DBN has agreed to assist businesses with debt consolidation and restructuring, as well as a grace period for recovery from COVID-19. Therefore, giving investors a sense of an investment’s level of risk and stability was the aim of the Fitch ratings. These ratings can be helpful for consumers searching for a stable financial situation in addition to investors.

Despite the anticipated slowdown in Namibia’s economy due to weakened global and domestic demand, DBN’s initiatives offer a lifeline for resilience. Sound credit policies have been put in place by the Development Bank of Namibia, guaranteeing ethical lending practices. The bank follows these policies as a guide when determining creditworthiness, controlling risk, and promoting economic expansion. A strong credit ecosystem is a result of initiatives like supporting small and medium-sized businesses (SMEs), encouraging innovation, and making capital more easily

accessible. In 2023, the Development Bank of Namibia (DBN) organized the Good Business Awards to honor outstanding companies. The significance of these awards, emphasizing that successful business goes beyond satisfying consumer demands and includes being flexible in the face of economic shifts as well as wisely saving money for future expansion and resilience. In order to finance infrastructure projects all across Namibia, the Development Bank of Namibia is essential. Through financing the development of necessary infrastructure, it promotes employment growth, economic advancement, and community well-being. The nation’s infrastructure is more resilient when investments are made in vital sectors like energy, telecommunications, and transportation.

In addition, strong governance, and a macroeconomic policy framework that encourages steady growth are important factors that have contributed to this rating. Even though Namibia faces difficulties like budget deficits and pressure from the business sectors, and positive net international investment position help to maintain overall stability. Hence, the DBN’s credit policies, initiatives, and infrastructure financing align with Namibia’s strong credit fundamentals, resulting in a stable outlook rating by Fitch. The main goals of DBN are to provide a means of advancing economic expansion and development as well as raising Namibians’ standard of living via infrastructural development. Therefore, the Development Bank of Namibia has welcomed the World Bank to explore potential collaboration between the two development financiers as part of the ongoing effort to improve business delivery and streamline business processes. Dr. John Steytler, the Chief Executive Officer of DBN, stated that DBN aspires to be the go-to partner for creative development solutions in Namibia. DBN will be able to realize its goal by utilizing strategic development partnerships with other development finance organizations, like the World Bank.

Moreover, the bank’s ratings may be lowered if the nation’s financial status deteriorates or if public support for it declines. However, the bank’s ratings may rise if the country’s financial status improves. As the national budget was presented on February 28, 2024, I am sure that Namibia’s responsible fiscal policy will earn it a high rating from rating agencies. Consequently, examining the budget’s financial statements reveals that gross revenue estimated to grow at an average pace of 11.5 percent to reach N$90.4 billion in FY2024/25 and N$ N$93.6 billion by FY2026/27, underpinned by the receipts from the SACU Customs Revenue Pool and strengthening domestic revenues as the economy recovers. Expenditure maintained at N$ 74.6 billion or 8.8% in 2023/24 financial year. Fiscal deficit is expected to decline by 3.2 percent of GDP. Crucially, this reflecting continued commitment to fiscal consolidation and sustainability. Gross government debt (total debt stock) increase to N$165.8 billion, or 60.1% of gross domestic product (GDP) during FY2024/25.

Consequently, growth-friendly structural reforms and well-thought-out fiscal consolidation can aid in lowering debt ratios. As was previously said, though, this is only a temporary fix, and the nation’s citizens’ livelihoods are heavily dependent on how well its government performs. Debt service costs will eventually start to reduce the fiscal’s consumptive and operational expenditure, which will lessen the availability of other services to those in need and erode the savings pool that so many have worked so hard to accumulate. This will happen if the fiscal stays consumptive in nature and does not structurally adjust expenditure toward productive activities that generate future revenue. Avoiding such a situation is imperative, as it will have a double negative impact. Despite the slowdown, Namibia’s economy has shown signs of improvement. According to the Namibia Statistics Agency (NSA), the country’s economic outlook has greatly improved. Based on the most recent quarterly GDP data, GDP growth is expected to slow to 4.0% in 2024 and 3.9% in 2025, down from 5.6% in 2023.

In conclusion, congratulations to the Development of Namibia for retaining stability in the face of extreme geopolitical unpredictability. In the macro economy, credit rating agencies play a critical role by evaluating the creditworthiness of governments and corporations, assessing investor risk, promoting market efficiency and transparency, and helping businesses raise capital from domestic investors.

In order for the Development Bank of Namibia to receive high credit ratings from agencies, it is necessary for the bank to continue reviewing and ratifying its manuals on an annual basis or whenever necessary.