Finance Minister Ericah Shafudah has said the 2025-26 financial year is anticipated to be an eventful year from a financing perspective.

Shafudah pointed out that the government is faced with the redemption of a US$750 million Eurobond on 29 October this year.

Minister Shafudah said the government managed to accumulate US$463 million in the Sinking Fund over the past several financial years, while the aim is to add another N$3 billion to this. Adding US$162 million to the Sinking Fund during this financial year before the maturity of the bond. 

This will leave a balance of N$2.3 billion.

A sinking fund is a fund of an economic entity by setting aside revenue over a period of time to fund a future capital expense or repayment of a long-term debt.

Shafudah said the balance will be refinanced through the domestic market, noting that given the prevailing interest rate levels, the government believes it is most optimal to source funding from the domestic market, considering the sufficient liquidity levels as well as the demonstrated appetite for government securities.

"Nonetheless, going forward post-FY2025/26, we aim to carefully balance the annual domestic financing requirements to avoid crowding out private sector funding. Furthermore, we will employ a combination of funding from multilateral organisations to finance infrastructure projects as well as explore potential off-budget financing solutions in partnership with the private sector."

In addition to redeeming the Eurobond, the Finance Minister said the government is also making substantial principal repayments to settle the International Monetary Fund's Rapid Financial Instrument financing to the tune of N$2.3 billion in this financial year and the final payment of N$1.2 billion in the next financial year.

Shafudah pointed out that the government is confident that the envisaged funding approach will stabilise the debt stock over the medium term. 

"Overall, the total public debt is estimated to moderate from 66% of GDP in FY2024/25 to 62% in FY2025/26. Furthermore, subsequent to settling these two hard currency obligations, over 80% of our debt stock will be denominated in the domestic currency and thus insulated from exchange rate risks. We believe domesticating our debt portfolio will strengthen the domestic capital markets while providing an avenue for deploying domestic capital in the domestic economy." 

A detailed Borrowing Plan for the issuance of domestic securities will be disseminated to market participants over the coming weeks.