Press Release: Statement at the Conclusion of the Article IV Staff Mission to Namibia
November 16, 2007Press Release No. 07/263
An International Monetary Fund (IMF) staff mission led by Mr. Peter Allum visited Windhoek to conduct the annual Article IV consultation discussions. The mission issued the following statement today at the conclusion of its work:
"Generally sound economic management and favorable external conditions have kept economic growth in Namibia in line with that of its regional partners, with real GDP projected to expand by 4.4 percent in 2007. Inflation has recently been driven higher by strong increases in food prices, but is expected to moderate to the 6 percent range in 2008, due in part to recent increases in interest rates. Strong mineral exports and Southern African Customs Union (SACU) receipts have contributed to a fiscal surplus, and are also projected to further raise a large external current account surplus, which is largely invested abroad in the form of portfolio investments in South Africa. Public debt is projected to fall to 23 percent of GDP by mid-2008.
"Against the backdrop of these generally favorable economic developments, the discussions with the Namibian authorities focused on a number of policy challenges:
"The favorable fiscal situation, if combined with expenditure reforms, offers opportunities to strengthen the economic base and reduce poverty. Although SACU receipts are projected to decline relative to GDP in the coming years, improvements in revenue administration and a reprioritization of expenditures should allow for increased outlays in priority areas such as rural infrastructure, education, and other programs that promote growth and support progress towards the Millennium Development Goals.
"The mission and the authorities agreed that reducing the high unemployment rate (estimated at more than 35 percent) calls for a larger contribution to growth from non-mineral manufacturing, tourism, and other service activities. Increasing competitiveness is key, requiring efforts to minimize business impediments and to foster a more flexible labor market. In this regard, the mission agreed that a careful balance needed to be struck with Namibia's important social goals for worker protection.
"The mission welcomed efforts to better utilize the high domestic savings rate to raise growth and employment. To facilitate efficient domestic absorption of Namibia's high savings, any amendments to domestic investment requirements should be incremental, providing an opportunity to monitor the impact on financial sector risk and returns. The mission suggested to consider market-based alternatives, including a broadening of the range of available domestic assets, for example through securitizing public agency funding.
"The mission shared the government's view that further development of the domestic financial sector would facilitate broad-based economic growth. Innovations by banks and other financial institutions in providing financial services to poorer households and small and medium-sized enterprises were welcome steps in this respect."