The government’s available cash balance dropped to zero at the end of May, forcing it to rely on an overdraft facility of N$1.8 billion to cover its financial needs.
This is according to the latest statement of assets and liabilities the Bank of Namibia (BoN) has released.
An overdraft allows the government to access funds beyond what is available in its account, similar to a temporary loan facility used to meet individuals’ financial commitments.
In March, the government recorded a negative balance of N$3.23 billion. This improved temporarily in April, when the state held a deposit of N$379.2 million.
However, by the end of May, the government had moved into an overdraft position of N$1.8 billion.
The overdraft contributed to an increase in the central bank’s domestic assets, which rose from N$1.21 billion in March to more than N$3.37 billion in May.
Economist Omu Kakujaha-Matundu says the overdraft does not signal that the government has gone broke.
“The N$1.8-billion overdraft is not a big deal. The BoN is the government’s banker and if the government is experiencing cash flow problems it requests an overdraft. Those are due to timing issues, not that the government is broke,” he says.
The central bank’s international investment holdings also recorded changes during the period.
Total investments increased from N$47.15 billion in March to N$50.92 billion in May.
However, May alone recorded a decline of about N$2.9 billion in these holdings, mainly linked to movements in foreign currency reserves, including the South African rand and other currencies.
The rand decreased by about N$1.82 billion, and other foreign currencies dropped by N$1.25 billion.
This reduction in foreign currency holdings contributed to an overall decline in the bank’s revaluation reserve, which shrank from N$7.35 billion to N$6.88 billion over the month.
Gold holdings recorded almost double growth during the period, increasing from N$164.7 million in April to nearly N$320 million by the end of May.
This N$155-million increase was a complete opposite of other external assets, such as International Monetary Fund special drawing rights holdings, which fell by roughly N$291 million during the same period.
Meanwhile, the amount of physical currency the public holds continued to rise.
Currency in circulation increased from N$5.42 billion in March to N$5.82 billion by the end of May, representing an increase of about N$400 million over the two-month period.
Despite the changes recorded across government finances and reserve holdings, the BoN’s overall asset position remained strong at N$65.77 billion.
