Wanted: More debt in yuan

Jo-Maré Duddy – China’s financing terms for the upgrading of the Hosea Kutako International Airport, set out in a letter circulating on social media, are “minimum standard” terms for projects implemented under the 2018 Forum on China-Africa Cooperation (FOCAC) and don’t just pertain to the airport, says finance minister Calle Schlettwein.Namibia has access to a loan facility of up to N$10 billion under FOCAC.The Chinese ambassador to Namibia, Zhang Yiming, on 2 July this year addressed a letter to the economic planning minister and director general of the National Planning Commission (NPC), Obeth Kandjoze, and proposed a combination of grants plus loans to fund the project. Copies were sent to Schlettwein and the deputy prime minister and minister of international relations and cooperation, Netumbo Nandi-Ndaitwah.The Chinese government offered to help if the upgrading is funded by “no more than 90%” of a concessional loan and “no less than 10%” of a grant. Interest of 2% per annum for 20 years, a management fee of 0.25% and a commitment fee will be charged. Namibia has a grace period of 5 years before repayment of the loan starts.Speaking to Market Watch on Tuesday, Schlettwein reiterated that these terms are not a done deal, that negotiations are ongoing and that the process is flexible.CurrencySchlettwein wrote to Zhang on 20 August 2018, confirming government’s “intention” to utilise China’s proposed funding of the project. The total estimate cost of upgrading Hosea Kutako is about US$215.4 million, according to his letter. At yesterday’s exchange rate, this is just above N$3 billion.Schlettwein told Market Watch that the Chinese offered that the loan could be repayed in yuan. This could act as a “natural hedge”, he said. One Chinese yuan cost slightly more than N$2 yesterday.The Chinese currency was included in Namibia’s basket of foreign reserves for the first time in 2016. According to the Bank of Namibia (BoN), about N$271.7 million out of the country’s total foreign reserves of approximately N$24.7 billion at 31 December 2016 was in yuan. At the end of 2017, yuan equalled N$262.7 million the basket of about N$30.2 billion.In his letter to Zhang, Schlettwein said government preferred to take up the proposed financing of Hosea Kutako in yuan as the country’s foreign debt portfolio is largely denominated in US dollar. According to the BoN’s latest annual report, about 7.7% of government’s total external debt of about N$26.4 billion at the end of last year was in yuan. In 2016, the figure was 8.4%.DebtAt a press conference in July, Schlettwein said around N$1.69 billion of government’s total debt of approximately N$76.6 billion is concessional loans from the Chinese government, while N$302 million is interest-free loans. This is about 8% of government’s total foreign debt and around 2.6% of total debt.“These loans offers are provided within mutual understanding between the two governments and contain concessional terms and conditions as opposed to market loans or other borrowing like those provided for by the development financial institutions and the bonds market,” Schlettwein said.The debt service towards Chinese loans includes capital repayment and interest and, in total, amounts to N$65 million, he said. “As a portion of total debt servicing obligations, the debt servicing for loans from China is around 1% of total debt servicing obligations.”Asked Tuesday when government intends accessing the loan facility to upgrade Hosea Kutako, Schlettwein said agreement must first be reached on the costs and the scope of the project.

Wanted: More debt in yuan

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Republikein 2025-11-06

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Wanted: More debt in yuan

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