Moody’s Investors Service on Friday downgraded Namibia’s long-term senior unsecured bond and issuer ratings to Ba1 from Baa3 and maintained the negative outlook. A Ba1 rating means speculative elements and are subject to substantial credit risk. The key factors for downgrading the rating are: Erosion of Namibia’s fiscal strength due to sizeable fiscal imbalances and an increasing debt burden; Limited institutional capacity to manage shocks and address long-term structural fiscal rigidities and Risk of renewed government liquidity pressures in the coming years. In a statement Moody’s says, “Despite the weakening of its creditworthiness, the country’s key credit metrics in the economic, fiscal and external spheres are currently well aligned with those of Ba1-rated peers. The rating is also supported by the country’s strong growth prospects in the coming years. “However, the maintenance of the negative outlook following the downgrade of the rating to Ba1 reflects the risk that the erosion in key fiscal and debt metrics could be more pronounced than currently anticipated, giving rise to significant funding challenges.” Namibia’s long-term local currency bond and bank deposit ceilings were also lowered to A2 from A1. The long-term foreign currency bank deposit ceiling to Ba2 from Baa3, and the long-term foreign-currency bond ceiling to Baa2 from A3. Reacting to this, Minister of Finance Calle Schlettwein said, “The Government call on the private sector and investor community to remain positive and supportive during this adjustment process. “A review of Namibia’s rating only four months into the budget implementation for 2017/18 financial year is made too early and, therefore, on a very narrow base and may contain speculative conclusions on the performance of the budget for the whole financial year. The process followed by Moody’s is, therefore, not systematic as we are busy developing the mid-year budget review and better informed ratings action and effective country assessment could have benefited from the mid-year budget review planned for October 2017. Schlettwein further said one of the positive development for Namibia which was ignored by Moody’s in this assessment is the level of foreign exchange reserves that increased to 5,3 months of import cover during the second quarter 2017. “This is a crucial variable in credit worthiness that cannot be ignored. It is puzzling that at a time when Namibia’s import coverage has increased, Moody decides to downgrade our credit ratings,” said Schlettwein. He expressed disappointment that “this recent rating acting by Moody’s relied merely on an exchange of emails on a single item, that of outstanding invoices and how Government is planning to settle them. A thorough assessment taking all factors into consideration would have been the proper way in dealing with reviewing Namibia’s sovereign credit rating.”