Press Release No. 23/328

IMF Staff Completes 2023 Article IV Mission to Namibia

October 2, 2023

• Driven by mining, Namibia’s real GDP grew 4.6 percent in 2022. Growth of 3.2 percent in 2023 is expected to bring output back above the pre-pandemic level.
• Maintaining the fiscal reform momentum is key to preserve debt sustainability, cushion against the volatility of SACU revenues, and foster private sector-led growth. Assisting the vulnerable takes on new importance in the context of the ongoing drought and the risk of resurgent fuel and food prices.
• New projects in green hydrogen, oil and gas exploration, and processing of critical minerals can help diversify the economy if accompanied by reforms to address skill mismatches and reduce the cost of doing business. Proper assessment of fiscal risks is needed before any budgetary commitments to such projects.

Windhoek, Namibia: An International Monetary Fund (IMF) staff team, led by Mr. Jaroslaw Wieczorek, IMF mission chief for Namibia, visited Windhoek during September 18 ‒ October 2, 2023, to conduct discussions for the 2023 Article IV Consultation with Namibia.

At the conclusion of the mission, Mr. Wieczorek made the following statement.

“On the back of sustained mining growth and recovery in tourism, real GDP growth reached 4.6 percent in 2022 and economic activity is expected to surpass the pre-pandemic level in 2023 with a growth of 3.2 percent. Nevertheless, unemployment remains elevated at 21 percent, and is particularly acute among the youth. For 2024 and the medium-term, growth path is expected to stabilize at just below 3 percent.

“Inflation, which rose sharply in 2022 due to high international oil and food prices, has eased in recent months, reflecting the global trend. Food price inflation has remained elevated, susceptible to resurging fuel and transport costs and the impact of the drought as well as climate change more broadly.

“The current account deficit widened in 2022 as the spike in fuel prices inflated the import bill. In 2023, the current account is expected to narrow reflecting the easing of fuel prices relative to 2022 and the recovery in the SACU revenues. International reserves are expected to increase moderately with external financing needs largely covered by foreign direct investment in mining and the ongoing oil and gas exploration.

“The fiscal deficit has narrowed considerably, from 8.6 percent in 2021/22 to 5.3 percent in 2022/23, as pandemic-related spending pressures eased, and measures were taken to contain the public wage bill growth and improve the performance of state-owned enterprises. Nevertheless, public debt continued to rise and reached 68.7 percent of GDP with the associated interest costs attaining 4.5 percent of GDP. Meanwhile, social assistance was expanded to address food insecurity.

“Going forward, implementing the authorities’ fiscal consolidation strategy is pivotal to preserve debt sustainability and protect against the volatility of SACU revenues, which represent a significant contribution to the budget. To this end, it is vital to accelerate public wage reform—including introducing early retirement—and the reform of state-owned enterprises. In this context, the issuance of the public asset ownership policy paper for consultation with stakeholders represents an important milestone.

“Efforts to ensure tax compliance should continue. Improving the licensing and the taxation of natural resource extraction, including fishing, will enhance revenue mobilization. In parallel, strengthening public financial management, including to improve large public projects selection, also remains a priority. Publishing a fiscal risk statement along with the budget document will enhance fiscal transparency and public debt management. Ensuring fiscal space for social measures will help mitigate the impact of high food prices on the vulnerable.

“To respond to inflationary pressures, the Bank of Namibia has tightened its policy stance following the South African Reserve Bank (SARB). Keeping the policy rate aligned with the SARB and maintaining an adequate level of reserves will support the currency peg and anchor inflation. Enhanced macroprudential oversight will help strengthen the resilience of the financial sector and support financial stability.

“Improving specialized statistical capacity will ensure consistent and proper recording of oil and gas exploration and tracking its impact on the economy.

“New mineral discoveries and the investment in green energy provide an opportunity to boost growth, employment, and foster diversification. Strengthening the public-private partnership framework and addressing constraints hampering entrepreneurship, including the regulatory burden, skill mismatches, input costs, especially energy and water, and governance challenges would help the Namibian economy benefit from the investments in these emerging sectors.

“The mission thanks the authorities for their excellent collaboration and warm hospitality.”