Namibia’s credit risk remains stable

International credit rating agency Fitch Ratings has kept Namibia’s credit risk rating the same at BB-, meaning the country is considered stable but vulnerable.

The ‘BB-’ rating places Namibia in the speculative or non-investment grade category.

Fitch Ratings is part of the ‘big three’ global credit rating agencies, along with Moody’s and Standard & Poor’s.

These agencies assess the ability of countries, companies, and other entities to repay their debts.

Fitch’s ratings scale goes from ‘AAA’ (highest credit quality, lowest default risk) down to ‘D’ (default).

A ‘BB’ rating (and thus ‘BB-’) is considered ‘speculative’ or ‘non-investment grade’.

The minus modifier indicates that Namibia is at the lower end of the ‘BB’ category, implying a slightly higher credit risk compared to ‘BB’ or ‘BB+’.

“Namibia’s ratings are supported by its strong governance indicators and institutional framework relative to rating peers, and fiscal financing flexibility supported by the large non-banking financial sector,” reads the report.

According to the report, this is balanced against high fiscal deficits and government debt relative to peers, large fiscal financing needs, and a rigid expenditure profile.

Fitch predicts the country will see widening of the fiscal deficit to 5% of gross domestic product (GDP) in the 2025 financial year.
Additionally, pressure on spending is expected to continue on high social spending and debt servicing.

Beyond the government’s direct obligations, Fitch also rated Namibia’s Country Ceiling at BB, a notch above the government’s own issuer default rating.

Country Ceiling is the maximum rating a private sector company could achieve in Namibia, regardless of how strong that company’s individual financials are.

“This higher ceiling reflects Fitch’s view that there are moderate constraints and incentives preventing the imposition of severe capital or exchange controls,” reads the report.

This means the chances of entities in Namibia defaulting on payments is much lower than the government’s own default rating.

However, Fitch also gave other factors that could, individually or collectively, lead to a negative rating downgrade for Namibia.
One of these factors is rising government debt-to-GDP.

“A marked increase in government debt-to-GDP, for example, due to higher fiscal deficits, and a deterioration in domestic and external borrowing conditions,” notes the report.

Currently, Namibia’s budget deficit widened in the 2024/25 financial year, and the debt-to-GDP ratio has seen a slight increase, reaching around 65.3% by the end of 2024.

Increased external vulnerabilities pose another risk.

“Increased external vulnerabilities, such as a sustained decline in international reserves, potentially driven by a substantial widening of the current account deficit, could create risks for sustainability of the long-standing currency peg,” reads the report.

Meanwhile, the report also showed some factors that could lead to a positive rating upgrade.

On a macro level, this will be investments in energy projects that may build confidence for investors.

“Greater confidence in stronger medium-term growth prospects, for example, derived from progress in investment projects in the energy sector, supports fiscal consolidation efforts,” adds the report.

Additionally, a reduction in government debt-to-GDP over the medium term, will lead to an upgrade.

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