Namibia plans to issue a debut rand-denominated bond next month to help to fund its budget deficit, expanding its investor base beyond its borders after a successful Eurobond last year, Deputy Finance Minister Calle Schlettwein said on Wednesday.
Namibia issued a debut $500 million 10-year Eurobond in October, with a coupon of 5.5 percent. The issue has done well since, with the yield falling to 4.8 percent on Wednesday from a high of 5.73 in November.
“The aim is to diversify our debt portfolio. Most of our debt is domestic. Last year's Eurobond listing was all in dollar- rated instruments and we want to reduce the foreign exchange risk,” Schlettwein said.
Windhoek plans to borrow between 2 and 3 billion rand ($364 million) over three years, Schlettwein told Reuters.
Namibia, one of the world's biggest diamond producers and a major source of uranium, pegs its currency at par to the South African rand in a common monetary union with Lesotho and Swaziland, mitigating the currency risk.
The south-west African country expects a budget shortfall of 4.4 percent of GDP for the current financial year.
South African bond yields have dropped to record lows in the past month as foreigners have piled into the country's relatively high-yielding debt ahead of its inclusion in Citi's influential World Government Bond Index in October .
As such, it could be cheaper for Namibia to raise funds in South Africa, where three-year debt is priced at 5.88 percent, compared with 6.40 percent in Namibia.
“We were encouraged by the success of the Eurobond listing and we are looking at a peg of the rate there. We have realised that the open market is a good way to source money,” Schlettwein said.
Absa and Rand Merchant Bank have been mandated to handle the issue, with a roadshow planned for August and the listing in the same month, he added. - Reuters