## 1namea2019001

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### Overview and recent performance
- Annual per capita GDP growth averaged 2.6 percent over the last two decades.
- Commodities (e.g., diamonds, copper, uranium) constitute about 45 percent of the country’s exports of goods and about 8 percent of GDP.
- Governance and institutions scored among the best in Africa (scores rescaled to 0-100 relative to upper middle income country medians).
- Unemployment about 33 percent; youth unemployment about 46 percent.
- Inequality, although declining, remains among the highest in the world.

### Economic rebalancing and growth dynamics
- 2010–15:
  - Annual GDP growth averaged 5¾ percent.
  - Macroeconomic imbalances: large fiscal deficits, widened current account deficit, declining international reserves, rapid credit growth, rising housing prices, elevated private sector indebtedness.
- 2016–17:
  - Real GDP began contracting as mining construction returned to pre-2010 levels and consolidation plans were implemented.
  - Current account deficits sharply narrowed; credit and house price growth decelerated; slowing productivity growth and deteriorating competitiveness became apparent.
- 2018:
  - Real GDP declined by 0.1 percent (was -0.9 percent in 2017).
  - Current account deficit narrowed to 2.1 percent of GDP (5 percent in 2017).
  - Total external debt remained around 60 percent of GDP (47¼ percent in 2015).
  - International reserve coverage remained about 4 months of projected imports.

### Fiscal position, adjustment, and public debt
- Since 2016: non-interest public expenditures reduced by about 10 percent of GDP.
- Despite cuts, deficits persisted due to declining domestic and SACU revenue and increased interest payments.
- FY18/19:
  - Fiscal deficit increased by about 2 percent of GDP to 5½ percent.
  - Public debt increased to 45¾ percent of GDP (51¾ percent including guarantees).
  - Gross financing needs about 17 percent of GDP, largely financed domestically.
- Sovereign ratings: Moody’s and Fitch confirmed rating one notch below investment grade, with a negative outlook; Namibia lost investment grade in 2017.
- SACU revenue decline in FY18/19 largely reflected adjustment to offset overpayments and a historically declining trend.
- Authorities’ FY19/20 intentions:
  - Pause in fiscal adjustment in FY19/20 and reduction in the primary fiscal deficit (excluding SACU revenue) of about 2 percent of GDP over the next two years.
  - Expect to stabilize public debt around 52 percent of GDP by FY21/22.
  - Plans to reorient spending toward investment; policies to contain salary dynamics and restructure extra-budgetary entities remain to be defined.

### Staff medium-term baseline projections (selected entries; percent of GDP unless specified)
- Real GDP Growth (annual change): 2017 -0.9; 2018 -0.1; 2019 -0.2; 2020 1.6; 2021 2.4; 2022 3.2; 2023 3.9; 2024 3.0
- Credit to the Private Sector (annual change): 2017 5.0; 2018 7.0; 2019 5.3; 2020 5.8; 2021 6.6; 2022 7.6; 2023 8.6; 2024 8.4
- Fiscal Balance: 2017 -3.4; 2018 -5.4; 2019 -5.6; 2020 -4.4; 2021 -5.5; 2022 -5.6; 2023 -5.6; 2024 -5.7
- Revenue: 2017 32.0; 2018 28.7; 2019 28.9; 2020 30.8; 2021 29.8; 2022 30.0; 2023 30.0; 2024 30.0
- Expenditure: 2017 35.5; 2018 34.1; 2019 35.2; 2020 36.0; 2021 36.0; 2022 36.2; 2023 36.3; 2024 36.4
- Gross Financing Needs: 2017 16.3; 2018 16.7; 2019 17.0; 2020 17.0; 2021 21.1; 2022 17.6; 2023 16.3; 2024 17.8
- Public Debt (excl. guarantees): 2017 41.0; 2018 45.8; 2019 49.2; 2020 50.9; 2021 51.4; 2022 53.0; 2023 54.3; 2024 56.0
- Current Account Balance: 2017 -5.0; 2018 -2.1; 2019 -4.1; 2020 -2.3; 2021 -3.8; 2022 -4.2; 2023 -4.2; 2024 -4.5
- Gross International Reserves (months of imports): 2017 4.2; 2018 3.9; 2019 4.2; 2020 4.5; 2021 4.0; 2022 3.7; 2023 3.5; 2024 3.4

### Financial sector, credit, and housing
- Nominal credit growth to the private sector stabilized around 6.8 percent in 2018 (12-month averages).
- Residential house price growth slowed to 1.7 percent (9¾ percent average over the past five years).
- NPLs more than doubled over the last two years from very low levels; banks tightened lending conditions.
- Banks’ direct exposures to the public sector rose to about 10 percent of banks’ total assets (7 percent in 2016).
- Macroprudential: minimum down-payment requirements and LTV limits introduced in 2016–17.
- Headline inflation: averaged 6.2 percent in 2017 and declined to 4.3 percent in 2018; subdued in early 2019.
- Bank of Namibia left policy rate unchanged until mid-2019 and broadly in line with the South African Reserve Bank; did not reflect SARB’s rate increase in November 2018.

### Labor market, poverty, and inequality
- Unemployment: overall about 33 percent; youth about 46 percent.
- Poverty and inequality:
  - Poverty declined from 28.8 percent in 2009/10 to 17.4 percent in 2015/16.
  - Gini coefficient declined from 0.58 to 0.56 between 2009/10 and 2015/16.
  - Wealth Gini: 0.82; top decile holds vastly more wealth (12 times median; >500 times poorest decile).
  - Children’s poverty declined from 34 percent in 2009/10 to 20.6 percent in 2015/16.
  - Authorities spend around 2 percent of GDP annually on social safety nets.

### Structural impediments and competitiveness
- Total factor productivity (TFP) growth declining; now at lowest level since independence in panel estimates.
- Namibia ranks behind comparable countries in key productivity areas: education, business environment, and technological readiness.
- Export concentration: mineral products around 60 percent of total exports; non-mineral non-food products share fell to <5 percent in 2017.
- REER and competitiveness:
  - CPI-based REER depreciation of 23 percent (2010–2016) then appreciation of 12 percent thereafter (net -13 percent over 2010–17).
  - CPI-based REER suggests undervaluation of 9 percent; ULC-based REER suggests a gap of +4.5 percent.
- Key bottlenecks: high electricity tariffs (20–25 percent higher than South Africa), obsolete rail infrastructure (rail accounts for 8–10 percent of transport), high broadband costs (rank 147 of 187 for fixed broadband affordability).

### Outlook, risks, and scenarios
- Baseline:
  - Real GDP projected to contract about 0.2 percent in 2019 due to poor rainy season and temporary reduction in diamond production.
  - Growth turns positive in 2020 and converges to long-run rate of about 3 percent.
  - Headline inflation projected to rise gradually and remain below 6 percent as recovery proceeds.
  - Under staff baseline with FY19/20 budget delivered and no further adjustment:
    - Public debt ratio would continue rising.
    - Gross financing needs remain large at about 18 percent of GDP.
    - Current account deficit stabilizes around 4 percent of GDP.
    - International reserve coverage would decline as external debt maturities are partially redeemed.
- No fiscal adjustment scenario:
  - If no measures implemented, fiscal and external balances deteriorate; public debt approaches 60 percent of GDP by end of projection period; reserves decline further.
- Downside risks:
  - Poor rainy seasons, declines in SACU revenue, adverse developments in South Africa, rising protectionism, weaker global growth, tighter global financial conditions.
  - Macro-financial feedback loops: shocks could tighten bank funding, decelerate private credit, reduce growth, depress house prices, increase NPLs, erode asset quality.

### Staff medium-term projections — no fiscal adjustment (selected entries; percent of GDP unless specified)
- Real GDP Growth (annual change): 2017 -0.9; 2018 -0.1; 2019 0.0; 2020 1.6; 2021 2.5; 2022 3.2; 2023 3.9; 2024 3.0
- Fiscal Balance: 2017 -3.4; 2018 -5.4; 2019 -6.3; 2020 -5.2; 2021 -6.3; 2022 -6.4; 2023 -6.5; 2024 -6.6
- Public Debt (excl. guarantees): 2017 41.0; 2018 45.8; 2019 49.7; 2020 52.1; 2021 53.3; 2022 55.6; 2023 57.6; 2024 59.9
- Gross International Reserves (months of imports): 2017 4.2; 2018 3.9; 2019 4.1; 2020 4.3; 2021 3.8; 2022 3.3; 2023 3.1; 2024 2.9

### Debt risks and stress tests
- Baseline public debt peak around 50 percent of GDP in FY20/21 under full adjustment scenario; gross financing needs remain about 16 percent of GDP.
- Macro-fiscal shock (shocks to growth and interest rates and lower primary balance): debt-to-GDP could rise to 75 percent and gross financing needs to 29 percent.
- External-debt vulnerabilities:
  - External debt rose to 58.4 percent of GDP at end-2018 (public and private components).
  - Private external debt is about 74 percent of total external debt; long- and medium-term maturities about 90 percent of total external debt.
  - Gross external financing needs projected average about 22.8 percent of GDP over projection period.
  - Scenario: CA widening by 3.5 percent of GDP during 2019–23 would increase external debt to about 82 percent of GDP by 2024; a one-time 30 percent depreciation raises external debt to about 67 percent of GDP.

### Policy priorities and recommended measures
- Fiscal:
  - Short-term: staff assess additional ¾–1 percent of GDP in measures required to contain the FY19/20 fiscal deficit within the budget target.
  - Medium-term: define policies to deliver planned additional adjustment of about 2 percent of GDP over next two years.
  - Recommended mix: spending reductions and selected revenue increases that protect the poor and support long-term growth.
  - Specific actions: contain salary indexation and new hires across all public entities; rationalize transfers to public enterprises; expand tax bases by reducing exemptions and special regimes.
- Immediate fiscal measures and financing needs:
  - An additional ¾–1 percent of GDP in measures needed to broadly attain FY19/20 deficit target.
  - FY19/20 financing needs would remain around 16–17 percent of GDP; authorities intend multilateral loans and domestic financing.
- Protecting low-income households:
  - Broaden coverage of children grants; improve targeting of housing programs; increase progressivity of personal income tax.
  - Doubling coverage of children’s grants (180,000 to 360,000) would reduce poverty by 1.8 percent, reduce inequality by 0.3 percent, cost about 0.4 percent of GDP.
- Public enterprises and extra-budgetary entities:
  - These represent about 9½ percent of GDP per year in budgetary burden.
  - Priority reforms: turnaround plans for loss-making enterprises (e.g., Air Namibia, TransNamib); review cost structures and mandates; enforce accountability and financial reporting.
  - Critical actions: develop fiscal risks framework, publish a risks statement, widen fiscal accounts coverage beyond central government.
- Revenue administration and PFM:
  - Strengthen in-house audits of large taxpayers; develop risk-based audits; implement simplified regime for small taxpayers; prioritize tax arrears collection; plan semi-autonomous revenue authority by late 2019.
  - Accelerate adoption of new PFM information system and chart of accounts; finalize PFM bill and State Finance Act amendments; fully implement 2015 Public Procurement Act regulations.
- Monetary policy and the peg:
  - BoN should keep policy rate broadly in line with the SARB and maintain the peg.
  - Complementary reforms: maintain fiscal discipline, address structural rigidities, foster factor mobility.
- Structural reforms to raise productivity:
  - Priorities: reform public enterprises in electricity and transport; accelerate National Single Window; streamline business regulations; reduce non-tariff barriers; foster technological readiness (broadband, e-services); improve vocational training and higher education access and quality.
  - Potential gains: closing half the gap with emerging market medians in regulatory quality, product market efficiency, and technological readiness could raise growth by about 1¾ percentage points per year.
- Financial sector oversight and crisis preparedness:
  - Prioritize passage of NAMFISA and FIM bills; revive risk-based supervision; operationalize macroprudential mandate and Financial Stability Committee; expand toolkit (including DSTI limits); grant BoN and NAMFISA full resolution powers; require recovery and resolution plans; operationalize emergency lending assistance.
- Financial inclusion and development:
  - 2017 Global Findex: 80 percent of adults had bank accounts, but only 9 percent borrowed from financial institutions.
  - SME credit declined below 1 percent of GDP.
  - Measures: enhance credit allocation to productive sectors; improve credit information system; introduce secured transactions framework for movable assets; modernize solvency regime for SME access.

### External sector assessment and reserves adequacy
- NIIP in 2018: -19.5 percent of GDP (-9.8 percent in 2017).
- Multilaterally consistent cyclically-adjusted CA norm: -3.8 percent of GDP; policy gap: -2.7 percent of GDP; cyclically-adjusted CA in 2018: -1.8 percent of GDP.
- EBA-lite REER: CPI-based REER undervaluation of 9 percent; ULC-based REER gap of +4.5 percent; staff rely more on CA methodology and assess external position broadly in line with fundamentals.
- International reserves: 16.1 percent of GDP (~4 months of imports) in assessment; IMF metric for market access countries 18–27 percent of GDP — Namibia below metric.
- Under baseline, reserves expected to decline to around 3.5 months of imports (14 percent of GDP) by 2024 unless adjustment fully implemented.

### Data, capacity development, and implementation priorities
- Data: broadly adequate for surveillance but improvements needed in fiscal accounts coverage, producer price statistics, and consistency of external sector statistics.
- Capacity development priorities: strengthen macro-fiscal forecasting, budget formulation, fiscal risks management, revenue administration, liquidity regulatory framework, stress testing for pension funds and insurance, and statistical improvements (producer prices, national accounts rebasing to 2015/16).
- Implementation status highlights:
  - Deposit Guarantee Act promulgated; parts operationalized May 2019.
  - Banking Institutions Bill approved by Cabinet awaiting Parliament.
  - FIM, NAMFISA, Financial Services Adjudicator bills tabled in Parliament June 2019.
  - Joint Prudential Supervisory Engagement Framework signed and implemented June 2019.
  - BoN collecting mortgage data from domestic systemically important banks.

### Staff appraisal — concise summary
- Namibia is rebalancing but faces significant challenges:
  - Public debt on rising path; international reserves below adequate levels; growth stalled.
  - Slowing productivity and declining external competitiveness.
  - High income inequality and unemployment.
- Staff recommends:
  - Deliver additional short-term measures of ¾–1 percent of GDP to meet FY19/20 target and define policies to deliver about 2 percent of GDP medium-term adjustment.
  - Combine credible fiscal consolidation with reforms to boost productivity and competitiveness, strengthen financial oversight, and protect the poor through better-targeted social spending.
  - Maintain peg-consistent monetary policy while addressing structural constraints.

*Source: 1namea2019001 - IMF country report text provided.*

### 1. Improved Living Standards and Strong Governance, yet High Inequality and Persistent

### 1. Improved Living Standards and Strong Governance, yet High Inequality and Persistent Unemployment

### Overview and recent performance
- Over the last two decades annual per capita GDP growth averaged 2.6 percent, resulting in better living standards and lower poverty and placing Namibia among the most gender-equal countries in the world.
- Governance and institutions are among the best-rated in Africa; governance indicator scores are presented relative to upper middle income country medians (scores rescaled to 0-100).
- Commodities (e.g., diamonds, copper, uranium) constitute about 45 percent of the country’s exports of goods and about 8 percent of GDP.
- Unemployment remains high at about 33 percent, and youth unemployment is about 46 percent.
- Inequality, although declining, is one of the highest in the world.

### Economic rebalancing and growth dynamics
- During 2010–15:
  - Annual GDP growth averaged 5¾ percent, boosted by construction of large mines and expansionary fiscal policies.
  - Macroeconomic imbalances built up: large fiscal deficits, a widened current account deficit, declining international reserves, rapid credit growth, rising housing prices, and elevated private sector indebtedness.
- In 2016–17:
  - Real GDP began contracting as mining construction returned to pre-2010 levels and consolidation plans were implemented.
  - Current account deficits sharply narrowed; credit and house price growth decelerated.
  - Slowing productivity growth and deteriorating competitiveness became apparent.
- In 2018:
  - Real GDP declined by 0.1 percent (was -0.9 percent in 2017).
  - The current account deficit narrowed to 2.1 percent of GDP (5 percent in 2017).
  - Total external debt remained around 60 percent of GDP (47¼ percent in 2015).
  - International reserve coverage remained about 4 months of projected imports.

### Fiscal position, adjustment, and public debt
- Since 2016 the government has reduced non-interest public expenditures by about 10 percent of GDP through reductions in non-wage recurrent spending and capital outlays.
- Despite spending cuts, deficits persisted due to declining domestic and SACU revenue and increased interest payments.
- FY18/19 fiscal developments:
  - Fiscal deficit increased by about 2 percent of GDP to 5½ percent, largely because of lower revenue.
  - Public debt increased to 45¾ percent of GDP (51¾ percent including guarantees).
  - Gross financing needs remained high at about 17 percent of GDP and were largely financed through domestic market issuances.
- Sovereign ratings:
  - Moody’s and Fitch confirmed Namibia’s sovereign credit rating one notch below investment grade, with a negative outlook.
  - Namibia lost its investment grade rating in 2017.
- SACU revenue notes:
  - The decline in SACU revenue in FY18/19 largely reflected an adjustment to offset overpayments in previous years and a historically declining trend.
- Authorities’ FY19/20 budget intentions:
  - Budget envisages a pause in fiscal adjustment in FY19/20 and a reduction in the primary fiscal deficit (excluding SACU revenue) of about 2 percent of GDP over the next two years.
  - Authorities expect to stabilize public debt at around 52 percent of GDP by FY21/22.
  - Plans to reorient spending toward investment outlays and to achieve adjustment largely via containing personnel costs and curbing non-wage recurrent spending; policies to contain salary dynamics and restructure extra-budgetary entities remain to be defined.
- Staff medium-term baseline projections (selected entries, percent of GDP unless otherwise specified):
  - Real GDP Growth (annual change): 2017 -0.9; 2018 -0.1; 2019 -0.2; 2020 1.6; 2021 2.4; 2022 3.2; 2023 3.9; 2024 3.0
  - Credit to the Private Sector (annual change): 2017 5.0; 2018 7.0; 2019 5.3; 2020 5.8; 2021 6.6; 2022 7.6; 2023 8.6; 2024 8.4
  - Fiscal Balance: 2017 -3.4; 2018 -5.4; 2019 -5.6; 2020 -4.4; 2021 -5.5; 2022 -5.6; 2023 -5.6; 2024 -5.7
  - Revenue: 2017 32.0; 2018 28.7; 2019 28.9; 2020 30.8; 2021 29.8; 2022 30.0; 2023 30.0; 2024 30.0
  - Expenditure: 2017 35.5; 2018 34.1; 2019 35.2; 2020 36.0; 2021 36.0; 2022 36.2; 2023 36.3; 2024 36.4
  - Gross Financing Needs: 2017 16.3; 2018 16.7; 2019 17.0; 2020 17.0; 2021 21.1; 2022 17.6; 2023 16.3; 2024 17.8
  - Public Debt (excl. guarantees): 2017 41.0; 2018 45.8; 2019 49.2; 2020 50.9; 2021 51.4; 2022 53.0; 2023 54.3; 2024 56.0
  - Current Account Balance: 2017 -5.0; 2018 -2.1; 2019 -4.1; 2020 -2.3; 2021 -3.8; 2022 -4.2; 2023 -4.2; 2024 -4.5
  - Gross International Reserves (months of imports): 2017 4.2; 2018 3.9; 2019 4.2; 2020 4.5; 2021 4.0; 2022 3.7; 2023 3.5; 2024 3.4

### Financial sector, credit, and housing
- Private sector credit and house price growth decelerated:
  - Nominal credit growth to the private sector stabilized at around 6.8 percent in 2018 (12-month averages used given series volatility).
  - Residential house price growth slowed to 1.7 percent (9¾ percent average over the past five years).
- Asset quality:
  - Nonperforming loans (NPLs) more than doubled over the last two years, although from very low levels.
  - Banks tightened lending conditions recently.
- Bank exposures:
  - Banks’ direct exposures to the public sector rose to about 10 percent of banks’ total assets (7 percent in 2016).
- Macroprudential measures:
  - During 2016–17, authorities introduced minimum down-payment requirements for instalment credit and loan-to-value (LTV) limits for non-primary home purchases.
- Central bank policy and inflation:
  - Headline inflation averaged 6.2 percent in 2017 and declined to 4.3 percent in 2018, mostly due to low increases in food prices.
  - Inflation remained subdued in the first months of 2019.
  - In the context of the currency peg, the Bank of Namibia left the policy rate unchanged until mid-2019 and broadly in line with the South African Reserve Bank’s rate; it did not reflect the SARB’s rate increase in November 2018.

### Labor market, poverty, and inequality
- Unemployment:
  - Overall unemployment about 33 percent.
  - Youth unemployment about 46 percent.
- Poverty and inequality remain key development challenges; annexes provide extended analysis on recent trends in poverty and inequality.

### Structural impediments and competitiveness
- Supply-side constraints limit productivity and growth; deteriorating competitiveness and declining potential growth were masked by earlier one-off growth factors.
- Exports competitiveness has declined; external sector assessment is included in Annex I and further analysis in Annex VI.

### Outlook, risks, and scenarios
- Baseline outlook:
  - Real GDP projected to contract by about 0.2 percent in 2019 due to a poor rainy season and a temporary reduction in diamond production.
  - Growth expected to turn positive in 2020 and gradually strengthen to converge to a long-run rate of about 3 percent.
  - Headline inflation projected to rise gradually and remain below 6 percent as the economy recovers.
  - Under staff’s baseline assuming government broadly delivers the FY19/20 budget target with no further adjustment afterward:
    - Public debt ratio would continue rising.
    - Government’s gross financing needs would remain large at about 18 percent of GDP.
    - Current account deficit would stabilize at around 4 percent of GDP.
    - International reserve coverage would decline as external debt coming due is partially redeemed.
- No fiscal adjustment scenario (staff projections shown):
  - If budget plans are not fully implemented (no measures this fiscal year and no adjustment going forward), fiscal and external balances would deteriorate.
  - Public debt would rise faster than baseline and approach 60 percent of GDP by the end of the projection period.
  - International reserve coverage would decline further.
- Downside risks:
  - Domestic and external shocks, including poor rainy seasons, declines in SACU revenue, adverse developments in South Africa, rising protectionism, weaker global growth, and tighter global financial conditions.
  - Macro-financial feedback loops: external shocks and South African developments could tighten domestic banks’ funding, decelerate private credit, reduce growth, depress house prices, increase NPLs, and further erode banks’ asset quality and financial intermediation.
- Staff medium-term projections (scenario with no fiscal adjustment) selected entries (percent of GDP unless otherwise specified):
  - Real GDP Growth (annual change): 2017 -0.9; 2018 -0.1; 2019 0.0; 2020 1.6; 2021 2.5; 2022 3.2; 2023 3.9; 2024 3.0
  - Credit to the Private Sector (annual change): 2017 5.0; 2018 7.0; 2019 5.5; 2020 5.9; 2021 6.7; 2022 7.6; 2023 8.6; 2024 8.4
  - Fiscal Balance: 2017 -3.4; 2018 -5.4; 2019 -6.3; 2020 -5.2; 2021 -6.3; 2022 -6.4; 2023 -6.5; 2024 -6.6
  - Public Debt (excl. guarantees): 2017 41.0; 2018 45.8; 2019 49.7; 2020 52.1; 2021 53.3; 2022 55.6; 2023 57.6; 2024 59.9
  - Gross International Reserves (months of imports): 2017 4.2; 2018 3.9; 2019 4.1; 2020 4.3; 2021 3.8; 2022 3.3; 2023 3.1; 2024 2.9

### Policy discussions and recommendations
- Policy priorities discussed:
  - Identify actions and strategies to credibly deliver fiscal adjustment plans to bring public debt to a sustainable path while supporting long-term development.
  - Pursue reforms to boost productivity, external competitiveness, and long-term growth potential.
  - Advance financial sector reforms to better manage macro-financial risks and support economic development.
- Fiscal policy design:
  - Authorities plan additional fiscal adjustment to stabilize the public debt ratio, but specific policies to fully deliver the adjustment are yet to be identified.
  - The budget’s envisaged pause in FY19/20, planned personnel cost containment, and further curbs to non-wage recurrent spending require concrete policy definitions; non-wage operational spending is already at historically low levels, making further cuts unlikely to be sustainable.
- Authorities’ stance:
  - Authorities broadly agreed with the medium-term outlook and staff’s risks assessment, expecting growth to be slightly positive in 2019.
  - They stressed the outlook depends critically on delivering the FY19/20 and medium-term fiscal targets and intend to fully deliver the FY19/20 fiscal targets.

*International Monetary Fund.*

### 14.      Staff estimate that, without additional actions, the FY19/20 fiscal deficit would exceed

### 14.      Staff estimate that, without additional actions, the FY19/20 fiscal deficit would exceed

### Fiscal outlook and scenarios
- Baseline outlook:
  - FY19/20 fiscal deficit expected to rise to about 6⅓ percent of GDP.
  - Under the baseline (authorities’ commitment to contain the FY19/20 deficit within the budget target and no measures going forward), public debt would gradually rise and approach 56 percent of GDP over the projection period.
  - Outlook subject to significant risks, particularly contingent liabilities as the financial situation of some public entities is rapidly deteriorating.
- Full fiscal adjustment scenario:
  - If policies fully deliver medium-term adjustment objectives, public debt would peak at about 50 percent of GDP in 2020 and slowly decline afterwards, remaining below the DSA risk thresholds and broadly in line with similarly rated peers.
- No fiscal adjustment scenario:
  - Public debt rises under no further corrective policies (illustrated in the projections as a divergent path above the baseline).

### Immediate fiscal measures and financing needs
- Short-term requirement:
  - An additional ¾–1 percent of GDP in measures is needed to broadly attain the FY19/20 fiscal deficit target and help maintain financing needs closer to the level of past years.
- Medium-term (next two years) requirement:
  - A combination of long-lasting reductions in key spending items and selected revenue increases could deliver the planned additional adjustment of 2 percent of GDP.
- Government financing needs:
  - Government’s FY19/20 financing needs would remain around 16–17 percent of GDP and, in line with past years, the authorities intend to cover these needs through a combination of multilateral loans and domestic financing.

### Staff-recommended policy measures (short and medium term)
- Spending-side measures:
  - Continue policy of limiting new hires and containing salary indexation over the current and next two years and apply these policies to all public entities.
  - Reform and rationalize functions of key public entities and enterprises to reduce their budgetary burden.
  - Improve efficiency of social spending by implementing spending reviews particularly in the education and health sectors.
- Revenue-side measures:
  - Create a level-playing field for private investors and expand tax bases by eliminating special tax regimes, reducing exemptions (e.g., corporate income tax, VAT), and eliminating tax loopholes.
  - Design options to limit short-term adverse effects on growth (e.g., reduce impact on low-income and cash-constrained households).
- Debt and reserve management:
  - Debt strategy should better balance management of upcoming external debt maturities with the need to preserve adequate international reserves and contain government’s gross financing needs.
- Expected effects:
  - Over time, these measures would better align wage dynamics with productivity trends, improve service efficiency, lower cost of key utility services, and have positive effects on productivity, external competitiveness, and long-term growth.

### Key fiscal and macro projections (staff medium-term projections; percent of GDP unless otherwise specified)
- Real GDP Growth (annual change): -0.9, -0.1, -0.2, 1.2, 2.0, 3.1, 3.8, 3.0
- Credit to the Private Sector (annual change): 5.0, 7.0, 5.3, 5.3, 6.2, 7.5, 8.6, 8.4
- Fiscal Balance: -3.4, -5.4, -5.6, -3.2, -3.5, -3.3, -3.3, -3.1
- Revenue: 32.0, 28.7, 28.9, 30.9, 29.9, 30.1, 30.1, 30.1
- Expenditure: 35.5, 34.1, 35.3, 36.1, 36.1, 36.2, 36.1, 36.0
- Additional measures (cumulative): 0.7, 2.1, 2.9, 2.9, 2.9, 2.9
- Fiscal Balance (excluding SACU): -14.1, -14.4, -14.9, -14.2, -13.2, -13.1, -13.0, -12.9
- Primary Balance: -0.5, -2.2, -2.0, 0.6, 0.3, 0.5, 0.6, 0.7
- Primary Balance (excluding SACU): -11.2, -11.1, -11.3, -10.4, -9.5, -9.3, -9.2, -9.1
- Gross Financing Needs: 16.3, 16.7, 17.0, 15.8, 19.1, 15.4, 13.9, 15.2
- Public Debt (excl. guarantees): 41.0, 45.8, 49.3, 49.9, 48.6, 48.2, 47.6, 47.2
- Current Account Balance: -5.0, -2.1, -4.1, -1.7, -2.7, -3.0, -2.9, -3.2
- Gross International Reserves (months of imports): 4.2, 3.9, 4.2, 4.7, 4.5, 4.4, 4.6, 4.8

### Protecting low-income households and redistributive policies
- Rationale:
  - Fiscal policy reduces headcount poverty by about 3 percentage points and the Gini coefficient by about 3 points, but effectiveness of cash transfers has recently been declining.
- Staff-recommended social measures:
  - Broaden coverage of children grants.
  - Improve targeting of existing housing programs, some of which are regressive.
  - Increase progressivity of the personal income tax.
- Design consideration:
  - Adopt well-targeted policies to reduce adverse effects on the poor from the needed fiscal adjustment.

### Public enterprises, extra-budgetary entities, and fiscal risks
- Magnitude of the challenge:
  - Extra-budgetary entities and public enterprises represent a significant burden for the budget (about 9½ percent of GDP per year) and a source of fiscal risks.
- Priority reforms for public enterprises:
  - Fast-track turnaround plans for key loss-making enterprises (e.g., Air Namibia, TransNamib).
  - Review cost structure of all entities and enforce limits on fast-rising wage costs.
  - Separate commercial and social activities of public enterprises, limit transfers to social activities, and review service tariffs where needed (e.g., NamWater).
  - Review mandates of all entities and enterprises, retaining only those with a clear rationale for public intervention.
  - Enforce stronger accountability framework (e.g., board appointments, borrowing and taxation powers, publication of financial statements).
- Off-budget financing risks:
  - Recent initiatives to support infrastructure via PPPs, public-enterprise financing, and the state-owned development bank could weaken fiscal transparency and create contingent liabilities if not properly managed.
  - Critical actions: further develop the fiscal risks framework, publish a risks statement, and widen coverage of fiscal accounts beyond the central government.

### Public financial management and revenue administration reforms
- Public financial management (PFM) priorities:
  - Accelerate adoption of a new information system and a chart of accounts to strengthen budget preparation and execution, improve fiscal reporting, and manage tight budgets.
  - Finalize the long-outstanding PFM bill and amendments to the State Finance Act to guide medium-term reforms.
  - Fully implement the 2015 Public Procurement Act regulations and extend new procurement rules to all public entities, focusing on value-for-money.
- Revenue administration priorities:
  - Strengthen capacity to conduct in-house audits of large taxpayers and develop risk-based audit and enforcement collection programs.
  - Implement a simplified tax regime for small taxpayers to reduce compliance burden.
  - Prioritize collection of tax arrears and avoid tax amnesties that would undermine tax compliance.
  - Authorities plan to create a semi-autonomous revenue authority by late 2019 and have rolled out an integrated tax system to automate internal processes.

### Monetary policy, exchange rate peg, and competitiveness
- Policy stance:
  - As government consolidates, the Bank of Namibia should keep the policy rate broadly in line with the SARB’s rate and maintain the peg with the South African rand.
- Role of the peg:
  - The peg has provided an effective nominal anchor, kept inflation low, and lowered transaction costs, while allowing some tailoring of the policy rate to Namibia’s cyclical position.
- Challenges:
  - The peg has implied exchange rate volatility due to rand variability, possibly hampering development of non-mining export-led activities by smaller investors.
- Complementary reforms needed:
  - Maintain fiscal discipline, address structural rigidities, and foster factor mobility to preserve competitiveness and flexibility under the peg.

### Supply-side reforms to boost long-term growth
- Structural constraints:
  - Total factor productivity (TFP) growth has been falling and is now at the lowest level since independence despite strong capital formation concentrated in mining, manufacturing, and transportation.
  - Competitiveness and regulatory indicators have declined due to weak business and regulatory environment, skills shortages, limited technology adoption, high labor costs, high production inputs (e.g., electricity), and logistics costs.
- Near-term and medium-term reform priorities:
  - Improve product market regulations and business conditions:
    - Reform public enterprises operating in electricity and transportation, prioritize trade-supportive infrastructure, streamline business regulations, review regulations hampering competition, and reduce non-tariff barriers and logistics costs.
  - Establish a well-structured salary policy for the public sector to contain growth in public sector wages and align them with productivity trends.
  - Foster technological readiness: promote e-services, increase speed and affordability of broadband services, and advance ICT literacy and digital skills.
  - Invest in human capital and reduce skills mismatches: increase labor permits for skilled workers in the short term; improve access and quality of secondary and tertiary education, improve efficiency of public education spending, and enhance vocational and on-the-job training programs over time.

*International Monetary Fund staff summary based on the source content provided.*

### 26.      The potential gains from removing key structural impediments to growth would likely

### 1namea2019001 - 26.      The potential gains from removing key structural impediments to growth would likely

### Structural reforms and growth potential
- Structural reforms could help Namibia’s productivity growth to catch up with emerging market economies.
- Growth could increase by about 1¾ percentage points per year if Namibia closes half of the gap with emerging market economies in the regulatory quality, product market efficiency, and the capacity to adopt new technologies.
- Staff analysis of potential gains from structural reforms relies on third party indicators that should be interpreted with caution due to their perception-based nature, lack of international standards in the methodology for each indicator, and uncertainty around the representativeness of survey samples.

### Authorities’ views on supply-side reforms
- Authorities consider supply-side reforms and fiscal adjustment policies the pillars to preserve macroeconomic stability and boost long-term growth.
- Immediate measures expected to bear fruit:
  - establishing the national single window facility;
  - finalizing the review of the Investment Promotion Act;
  - encouraging private sector participation in the electricity sector by modifying the current single buyer model;
  - partially re-privatizing a telecoms provider.
- Authorities noted preference provisions in public procurement are needed to improve productive capacity and develop an industrial basis.
- A high-level panel of experts has been appointed to advise on accelerating economic recovery and employment creation.

### Macro-financial conditions and risks
- Banking sector:
  - Assets about 70 percent of GDP.
  - Remains well capitalized; liquidity indicators have recently improved.
  - Excess liquidity invested largely in government securities, increasing banks’ exposures to sovereign risk.
  - NPLs have more than doubled over the last two years, particularly in the sectors most affected by the economic contraction.
  - With the financial cycle lagging the real sector, NPLs are likely to remain on a rising path and continue weighing on banks’ profitability and asset quality.
- Non-bank financial institutions (NBFIs):
  - Large NBFI sector comprising a fully-funded pension fund and insurance companies with assets about 150 percent of GDP.
  - Solvency levels exceeded regulatory requirements amid a decline in funding levels and excess assets.
- Key vulnerabilities to monitor and manage:
  - Banking sectors’ concentration risks: highly concentrated loan books and reliance on wholesale deposits -> liquidity, counterparty and asset-class concentration risks.
  - Private sector indebtedness: corporate and household leverage is elevated and comparable to levels prevailing in advanced economies; elevated household indebtedness and banks’ large exposure to residential mortgages raise resilience concerns given depressed real income growth and an estimated house price overvaluation still around 8 percent.
  - Interconnections among financial institutions: asset managers and money market funds account for about a quarter of banks’ deposits; asset management companies and money market funds about 170 percent of banks’ assets, creating potentially large contagious risk channels.
  - Sovereign-financial sector nexus: domestic financial sector holds most of government’s domestic debt, about 13 percent of the sector’s assets.

### Financial oversight, regulation, and crisis preparedness
- Progress and gaps:
  - Some legislative changes recently approved; major bills upgrading the regulatory framework for the NBFI sector, including the NAMFISA and the Financial Institutions and Market (FIM) bills, have not been approved yet.
  - Passage of these bills should be prioritized to address significant regulatory gaps and allow NAMFISA to strengthen oversight.
  - NAMFISA should revive efforts to introduce risk-based supervision.
- Banking sector oversight:
  - BoN has continued improving its supervisory regime and issued directives to address loan classification issues.
  - Remaining shortcomings: need supervisory actions to support directives implementation and continued monitoring of collateral valuation.
  - Authorities should accelerate steps to remove obstacles to the adoption of the Basel III liquidity framework, such as eliminating differential tax and regulatory treatments across deposit-taking institutions and introducing a centralized securities depository.
- Macroprudential framework:
  - Amended BoN Act would give an explicit macroprudential mandate to the BoN.
  - To operationalize the framework, strengthen coordination between the BoN, NAMFISA and the Ministry of Finance, including through creation of the planned Financial Stability Committee.
  - Expand macroprudential toolkit to include debt service-to-income (DSTI) limits and other tools to curb risks from highly leveraged households.
- Crisis preparedness and management:
  - Recent approval of a deposit guarantee scheme is a first step.
  - Additional actions needed: grant BoN and NAMFISA full resolution powers of financial institutions; require banks to submit recovery and resolution plans; operationalize emergency lending assistance; strengthen cooperation with the SARB on resolution planning of large groups.

### Financial inclusion and development role of finance
- Financial inclusion:
  - According to the 2017 Global Findex Survey, 80 percent of adults had bank accounts, but only 9 percent borrowed from financial institutions.
  - In recent years SME credit has on average declined below 1 percent of GDP.
  - Credit is concentrated in household mortgages and corporations in non-tradable sectors, thus having limited effects on long-term growth dynamics.
- Policy measures to improve financial access and support growth:
  - Enhance credit allocation towards more productive sectors.
  - Improve credit information system.
  - Introduce a secured transaction framework for movable assets.
  - Modernize the solvency regime to facilitate SME access to finance.
  - Reassess mandates of poorly performing state-owned financial institutions, particularly in housing and agriculture.

### Other institutional and statistical issues
- Public sector capacity:
  - A medium-term strategy has been developed to integrate surveillance priorities with Fund capacity development activities focusing on: improving PFM systems and fiscal risks management, creating a new revenue authority, supporting implementation of the 2018 FSSA’s recommendations, and strengthening economic statistics.
- Statistics:
  - Statistical data are broadly adequate for surveillance, but further improvements are needed, particularly in fiscal and national accounts.
  - Recommended improvements: expand coverage of fiscal accounts, produce producer price statistics, and improve consistency of external sector statistics.

### Staff appraisal and policy recommendations
- Overall assessment:
  - Namibia’s economy is rebalancing, but significant challenges remain: public debt on a rising path, international reserves below adequate levels, and growth has come to a halt; slowing productivity and declining external competitiveness; high income inequality and unemployment.
- Fiscal policy:
  - Authorities’ fiscal consolidation objectives strike an appropriate balance, but actions are needed to deliver outcomes.
  - In the short term, staff assess that an additional ¾–1 percent of GDP in measures is required to contain the FY19/20 fiscal deficit within the budget target.
  - Policies to deliver the adjustment planned for the next two years (about 2 percent of GDP) need to be fully defined.
  - Recommended measures:
    - Combine spending reductions and selected revenue increases that enhance long-term growth while protecting the poor.
    - Continue containing salary indexation and new hires and apply policy to all public entities.
    - Rationalize transfers to public entities and enterprises.
    - Expand tax bases by reducing exemptions and special tax regimes.
    - Widen coverage of children’s grants, better target housing programs, and adopt a more progressive personal income tax to protect the poor.
    - BoN should keep the policy rate broadly in line with the SARB’s rate and maintain the peg.
- Fiscal reforms and credibility:
  - Rationalize public enterprises and extrabudgetary entities, strengthen revenue administration, and improve budget and expenditure controls.
  - Control off-budget financing of investment projects, develop a fiscal risks framework, and publish a risks statement.
  - A Fund medium-term capacity development strategy has been developed to support improvements in these areas.
- Structural reforms to boost productivity and competitiveness:
  - Reduce policy uncertainty and remove obstacles to stronger and more inclusive growth.
  - Specific reform priorities:
    - Streamline business regulations (e.g., lowering regulatory compliance costs).
    - Reduce high electricity and transportation costs (e.g., reform public enterprises in these sectors).
    - Contain public sector salary dynamics to better align productivity and wage dynamics.
    - Avoid regulations hampering domestic competition (e.g., preferential procurement rules).
    - Reduce non-tariff obstacles to exports (e.g., quotas, imports ban, SACU-related restrictions).
    - Address shortages of well-educated and skilled workers through better access and quality of higher education, vocational and on-the-job training programs.
    - Foster adoption of new technologies (e.g., better broadband services).
  - The potential gains from improvements in these areas could be large.
- Financial sector oversight:
  - Adopt planned legislative changes to address regulatory gaps in the large non-bank financial industry (e.g., NAMFISA, Financial Institutions and Market bills) expeditiously and revive risk-based supervision efforts.
  - Strengthen coordination between BoN, NAMFISA and the Ministry of Finance through the planned Financial Stability Committee.
  - Complement the macroprudential toolkit with DSTI limits and other measures to manage risks from the highly leveraged private sector.
  - Accelerate development of a full crisis management and resolution framework, including granting BoN and NAMFISA full resolution powers and operationalizing emergency lending assistance.

*Source: 1namea2019001 - IMF country report text provided.*

### 41.      Staff proposes that the next article IV consultation with Namibia takes place on the

### 1namea2019001 - Namibia: Staff Proposal and Key Findings

### Macroeconomic rebalancing and growth
- GDP at constant prices (annual percent change): 6.1, 1.1, -0.9, -0.1, -0.2, 1.6, 2.4, 3.2, 3.9, 3.0 (2015–2024, Prel/Proj).
- GDP deflator (annual percent change): 2.0, 9.4, 9.7, 6.5, 4.4, 5.2, 5.2, 5.3, 5.6, 5.3 (2015–2024).
- Consumer prices (end of period): 3.7, 7.3, 5.2, 5.1, 4.8, 5.5, 5.5, 5.5, 5.5, 5.5 (2015–2024).
- Summary findings:
  - After years of outperformance, the economy decelerated and started contracting as temporary stimulus from mine construction dissipated and government consolidation began.
  - Recent developments triggered a rebalancing: the current account deficit sharply narrowed and growth in credit to the private sector decelerated, contributing to lower inflation.

### External sector and reserves
- Current account balance (US$ millions): -1,583, -1,740, -684, -301, -586, -338, -586, -694, -741, -831 (2015–2024).
- Current account (percent of GDP): -13.5, -15.4, -5.0, -2.1, -4.1, -2.3, -3.8, -4.2, -4.2, -4.5 (2015–2024).
- Exports (US$) annual percent change: -15.7, -2.4, 19.0, 12.2, 0.4, 7.1, 4.6, 5.6, 6.7, 4.3 (2015–2024).
- Imports (US$) annual percent change: -5.4, -12.8, -1.0, 4.0, 4.0, 4.3, 5.5, 4.3, 6.6, 5.3 (2015–2024).
- Gross official reserves (US$ millions, end of period): 1,580, 1,791, 2,216, 2,156, 2,407, 2,740, 2,573, 2,489, 2,515, 2,572 (2015–2024).
- Months of imports of goods and services: 3.0, 3.5, 4.2, 3.9, 4.2, 4.5, 4.0, 3.7, 3.5, 3.4 (2015–2024).
- Summary findings:
  - Trade deficit halved reflecting both sharp compression in imports and rising exports from newly completed mines.
  - Better current account and government external borrowing boosted reserves, although reserves remain below adequate levels.
  - External gross financing needs remain elevated and the net international investment position is on a declining path.

### Fiscal consolidation, deficits, and public debt
- Central government overall balance (percent of GDP): -8.5, -9.0, -3.4, -5.4, -6.3, -5.2, -6.3, -6.3, -6.4, -6.4 (2015/16–2024/25 FY).
- Primary balance (percent of GDP): -6.8, -6.4, -0.5, -2.2, -2.0, -0.7, -1.7, -1.5, -1.4, -1.3 (2015/16–2024/25 FY).
- Public debt/GDP (percent): 39.9, 42.6, 41.0, 45.8, 49.2, 50.9, 51.4, 53.0, 54.3, 56.0 (2015–2024).
- Gross public and publicly guaranteed debt/GDP (percent): 44.5, 47.8, 46.9, 51.8, 55.8, 58.1, 59.2, 61.4, 63.3, 65.3 (2015–2024).
- Selected fiscal aggregates (N$ millions, FY 2015/16–2024/25):
  - Total revenue and grants: 52,216; 50,849; 58,768; 55,741; 58,928; 67,175; 70,103; 76,941; 84,130; 91,431.
  - Expenditure and net lending: 65,259; 66,076; 65,080; 66,303; 71,778; 78,418; 84,828; 93,029; 101,960; 110,839.
  - Overall balance (N$ millions): -13,043; -15,227; -6,312; -10,562; -12,849; -11,243; -14,725; -16,088; -17,830; -19,408.
- Summary findings:
  - Significant consolidation achieved over the last two years, despite revenue headwinds, mostly via large reductions in non-wage recurrent spending and capital outlays.
  - Nevertheless, large deficits and debt maturities kept gross financing needs elevated and the public debt ratio continued rising.
  - Significant spending inefficiencies remain, particularly in the health and education sectors.

### Financial sector resilience and vulnerabilities
- Bank capitalization and asset quality:
  - Regulatory capital to risk-weighted assets (percent): 15.3, 14.0, 14.2, 14.2, 14.4, 14.7, 14.3, 15.1, 15.5, 16.8 (2010–Mar-19 series).
  - Nonperforming loans to total gross loans (percent): 2.0, 1.5, 1.3, 1.3, 1.2, 1.6, 1.5, 2.5, 3.6, 3.8 (2010–Mar-19).
- Monetary aggregates and credit:
  - Domestic credit to the private sector (percent change): 13.8, 8.6, 5.0, 7.0, 5.3, 5.8, 6.6, 7.6, 8.6, 8.4 (2015–2024).
  - Credit to the private sector (percent of GDP): 52.5, 51.6, 49.8, 50.1, 50.6, 50.1, 49.6, 49.1, 48.6, 48.6 (2015–2024).
  - Broad money (M2) (N$ millions): 81,934; 85,949; 94,143; 104,353; 108,799; 116,227; 125,193; 136,086; 149,297; 161,875 (2015–2024).
- Summary findings:
  - Banks remain well capitalized and liquidity buffers have recently improved.
  - The weak economy started weighing on asset quality; household indebtedness is high and loans are concentrated on mortgages.
  - Banks’ funding is highly dependent on wholesale deposits from other financial institutions with large foreign exposures, increasing vulnerability to external shocks.
  - The financial sector’s exposure to sovereign risk is rising through increased holdings of government securities.

### Poverty, inequality, and social outcomes
- GDP per capita (US$, constant 2000 exchange rate): 9,489; 10,298; 10,994; 11,478; 11,745; 12,313; 13,017; 13,886; 14,951; 15,909 (2015–2024).
- Summary findings:
  - Over past decades per capita income increased and living standards improved; poverty declined and strong institutional/governance frameworks underpinned progress.
  - Nonetheless, unemployment remains persistently high, particularly among youth, and income inequality—although declining—is one of the highest in the world.
  - Fiscal policy plays a key role in reducing poverty and inequality, but targeting is limited and even the richest households benefit from cash grants.
  - Relative poverty is high in both urban and rural areas; child poverty and lack of basic services for the urban poor are significant concerns.

### Supply-side constraints and competitiveness
- Summary findings:
  - Total factor productivity growth has been on a declining trend since 2000.
  - Productivity growth is held back by lack of well-educated and skilled workers, limited technological readiness, and weaknesses in the business environment.
  - Exports remain dependent on mineral exports; non-mineral export market shares have declined.
  - Export competitiveness is hindered by real exchange rate appreciation as unit labor costs increased, relatively high salaries for skilled workers, costly production inputs, and several non-tariff barriers.

### Key vulnerabilities and policy implications (staff observations)
- Fiscal
  - Ongoing consolidation is necessary to stabilize public debt, but measures must guard against excessive cuts to growth-enhancing capital spending and social protection.
  - Address spending inefficiencies, particularly in health and education, to improve outcomes without additional fiscal cost.
- External and monetary
  - Strengthen reserve buffers and manage external borrowing to reduce gross external financing needs.
  - Maintain prudent monetary stance to support disinflation while safeguarding financial stability.
- Financial sector
  - Enhance supervision to address rising nonperforming loans and concentration risks (mortgages, wholesale funding).
  - Reduce banks’ vulnerability to external shocks by diversifying funding and managing foreign exposures.
- Structural reforms
  - Improve labor skills, technological readiness, and the business environment to raise productivity.
  - Implement trade-facilitating measures and reduce non-tariff barriers to diversify exports and strengthen competitiveness.
- Social policy
  - Improve targeting of fiscal transfers to better reach the poor, with a focus on child poverty and urban services.

*Source: 1namea2019001 (IMF staff content).*

### Annex I. External Sector Assessment

### Annex I. External Sector Assessment

### A. External Sector Assessment — Overview and Methodology
- Assessment uses two IMF panel regression-based methodologies: the current account (CA) and the Real Effective Exchange Rate (REER) and External Balance Assessment (EBA) models, supplemented by analysis of the net international investment position (NIIP) and international reserves adequacy.

### Net International Investment Position (NIIP)
- Background findings:
  - NIIP deteriorated since 2009; in 2018 the net foreign position reached -19.5 percent of GDP (-9.8 percent in 2017) from a positive net position in previous years.
  - Deterioration largely due to a sharp increase in external liabilities as net FDIs (mostly in the mining sector) and more recently external debt (59 percent of GDP) from non-financial corporations and the government (following the 2015 Euro-Bond).
  - Increase in domestic investment requirement for pension funds and insurance companies announced in 2016–17 contributed to reduction in foreign assets.
- Assessment and outlook:
  - Under Staff’s baseline scenario, a decline in external debt, partly driven by a reduction in government external debt, would likely contribute improve the NIIP going forward.
  - Main risks: high external debt especially for the private sector; risks moderated because a large part is due to parent companies.

### Current Account (CA)
- Background trends:
  - 2006–15: CA deteriorated to a deficit of 15.4 percent of GDP in 2015, driven by sharp increase in imports (expansionary fiscal policy and large mine construction) and a drop in nonmineral exports (14 percent of GDP in 2015 from 21 percent of GDP in 2009).
  - 2016 onward: construction of large mines ended and the government began consolidating; CA deficit declined to 5 percent of GDP in 2017 and to 2.1 percent of GDP in 2018.
  - 2018 drivers: surge in exports of goods and services (1.7 percent of GDP), particularly mineral exports as new mines began operating; nonmineral goods exports also increased.
  - Private sector was main driver of CA improvement in 2018; government wage restraint may have indirectly contributed to lower private consumption.
- Quantitative assessment (EBA-lite revised CA methodology):
  - Multilaterally consistent cyclically-adjusted CA norm: -3.8 percent of GDP.
  - Policy gap: -2.7 percent of GDP.
  - Cyclically-adjusted CA in 2018: -1.8 percent of GDP.
  - Model residual: about 5 percent of GDP (may reflect structural and temporary factors not captured by model, e.g., intertemporal inconsistency in mining investment/production).
  - Private sector investment: declined to 8.4 percent of GDP in 2018 (lowest since 1994); 2017 private investment about 9.7 percent of GDP.
  - Accounting for higher investment (e.g., 2017 private investment), underlying cyclically-adjusted CA balance would be -3.1 percent of GDP.
  - Implication: REER undervaluation of 2 percent (signal that exchange rate broadly in line with fundamentals and desirable policies).
- Statistical uncertainty:
  - Net errors and omissions reached -1.8 percent of GDP.

### Real Effective Exchange Rate (REER)
- Background:
  - Namibian dollar pegged at par to the South African rand; REER tracks rand developments.
  - REER movements: depreciated by 23 percent between 2010–2016 and appreciated by 12 percent thereafter (net -13 percent over 2010–17).
  - In 2018, REER broadly stable on average; CPI-based REER likely underestimates weakening cost competitiveness.
  - ULC-deflated REER more stable: depreciation of only 2 percent over 2010–18 (decoupling due to rapid increase in real wages in excess of productivity).
- EBA-lite REER results:
  - CPI-based REER suggests undervaluation of 9 percent.
  - ULC-based REER suggests a REER gap of +4.5 percent.
- Assessment conclusion:
  - Given CPI-based REER limitations, staff rely more on CA methodology and assess external position as broadly in line with fundamentals and desirable policies.

### Financial Account
- Background developments in 2018:
  - Lower FDI and loans to the private sector: 0.8 percent of GDP (the lowest level in the decade).
  - Portfolio outflows declined following enforcement of higher domestic investment requirement on pension funds.
  - Gross external financing needs declined from 34 percent of GDP in 2015 to about 23.5 percent of GDP.
- Assessment and policy implications:
  - FDI inflows on downward path despite volatility linked to mining investments.
  - Greater domestic asset requirements for public funds could partially offset FDI decline short-term.
  - Emphasis on accelerating reforms to improve business climate and competitiveness, which has been deteriorating in recent years.

### B. International Reserves Adequacy
- Background:
  - Reserves increased to 3.2 months of imports in 2015 (boosted by Eurobond issuance and BoN swap operations) and have been steadily increasing to about 4 months of imports (16.1 percent of GDP), reflecting improving current account and higher external borrowing by private sector.
- Assessment against IMF metric:
  - International reserves at 16.1 percent of GDP are below IMF’s metric for market access countries (18–27 percent of GDP).
  - The IMF metric has been increasing mainly due to upward trend in short-term debt.
- Baseline projection:
  - Under staff baseline scenario, reserves expected to decline to around 3.5 months of imports (14 percent of GDP) by 2024 as the government redeems part of external maturities coming due.
  - If authorities fully implement adjustment plans, reserves coverage should return to adequate levels.

*Source: Annex I. External Sector Assessment — Namibia.*

### 63.5 and 26.6 percent of GDP by FY21/22, respectively. A macro-fiscal shock—entailing shocks to

### 1namea2019001 - 63.5 and 26.6 percent of GDP by FY21/22, respectively.

### Public debt outlook and scenarios
- Baseline projection: public debt would peak in FY20/21 at about 50 percent of GDP and slightly decline afterwards.
- Gross financing needs:
  - Baseline: would remain high at around 16 percent of GDP.
  - Under a macro-fiscal shock (shocks to growth and interest rates, and a temporary lower primary balance): debt-to-GDP would rise to 75 percent and gross financing needs to 29 percent.
- If the authorities fully implement medium-term adjustment plans (2 percent of GDP over the next two years), the debt outlook would significantly improve (see baseline peak at about 50 percent of GDP and subsequent slight decline), but gross financing needs would remain around 16 percent of GDP.

### External debt stock and composition
- Public external debt:
  - Stock rose during 2013–2018 to reach 58.4 percent of GDP at end-2018, roughly doubling over the period.
  - Public (without guarantees) as percent of GDP: 2013: 8.6; 2014: 8.5; 2015: 15.7; 2016: 15.4; 2017: 14.0; 2018: 16.1.
- Private external debt:
  - Private amounts to 74 percent of total external debt and is mostly loans between fellow enterprises.
  - Private (percent of GDP): 2013: 29.2; 2014: 35.0; 2015: 34.4; 2016: 41.8; 2017: 46.6; 2018: 43.6.
- Maturity composition:
  - Short-term external debt (percent of GDP): 2013: 8.1; 2014: 8.0; 2015: 5.6; 2016: 6.4; 2017: 7.7; 2018: 7.0.
  - Long and medium-term external debt (percent of GDP): 2013: 29.0; 2014: 35.0; 2015: 41.7; 2016: 52.0; 2017: 54.0; 2018: 51.4.
- Currency composition: only about 20 percent of external debt is denominated in a foreign currency different from the South African rand.
- Maturity: about 90 percent of total external debt has long and medium-term maturities.

### External debt projections and vulnerabilities
- External debt-to-GDP is projected to gradually decrease over time, starting to fall after 2020 driven mostly by public external debt.
- Gross external financing needs (GEFN) are projected to average about 22.8 percent of GDP over the projection period; short-term debt amortization is about one third of the GEFN.
- Scenario sensitivities:
  - Non-interest current account deficit widening by 3.5 percent of GDP (1/2 standard deviation shock) during 2019–23 would increase external debt to about 82 percent of GDP by 2024.
  - A 30 percent exchange rate depreciation would increase external debt to about 67 percent of GDP (limited sensitivity because only about 20 percent of external debt is denominated in a foreign currency different from the South African rand).
  - Real interest rate shocks have small impact due to sizeable share of fixed-rate debt.

### Debt service, financing needs, and indicators (selected figures)
- Long-term debt amortization profile (percent of FY GDP) depicted for 2018/19 through 2024/25 with separate External and Domestic (long term) components (chart source: IMF staff estimates).
- Namibia: External debt (percent of GDP) total: 2013: 37.1; 2014: 43.0; 2015: 47.2; 2016: 58.4; 2017: 61.7; 2018: 58.4.
- Gross external financing need (in percent of GDP): reported projection average about 22.8 percent of GDP; Table 1 lists specific values and shows gross external financing need in billions of US dollars (2014–2024), e.g., 2014: 3.3; 2015: 3.7; 2016: 3.8; 2017: 3.0; 2018: 2.9; 2019: 3.3; 2020: 3.1; 2021: 3.9; 2022: 3.8; 2023: 3.9; 2024: 4.2 (in billions of US dollars).
- External-debt-to-exports ratio (in percent): 2014: 113.9; 2015: 134.6; 2016: 175.9; 2017: 187.0; 2018: 170.4; 2019: 179.8; 2020: 175.7; 2021: 170.6; 2022: 166.2; 2023: 162.4; 2024: 163.2.

### Stress tests and risk assessment
- Public DSA stress tests indicate:
  - Macro-fiscal combined shock raises gross nominal public debt to as high as 75 percent of GDP and gross financing needs to 29 percent of GDP.
  - Primary balance shock, real GDP growth shock, real interest rate shock, and exchange rate shock are analyzed separately and in combination; charts show debt paths under these shocks (figures summarize impacts for 2019–2024).
- External-debt bound tests:
  - Current-account (CA) shock scenario projects external debt reaching about 82 percent of GDP by 2024.
  - Combined shocks scenario projects external debt around 83 percent of GDP by 2024.
  - One-time 30 percent real depreciation in 2018 projects external debt near 67 percent of GDP.

### Fiscal realism and forecast track record
- Forecast track record comparisons (2017 median errors and percentiles):
  - Real GDP growth forecast error: Namibia median forecast error 0.80, percentile rank 94%.
  - Primary balance forecast error: Namibia median forecast error -2.16, percentile rank 16%.
  - Inflation (GDP deflator) forecast error: Namibia median forecast error 1.36, percentile rank 91%.
- Assessment of realism of baseline assumptions includes bootstrapped and historical comparisons for real GDP growth, inflation, and cyclically-adjusted primary balance metrics.

*Source: IMF staff estimates and analysis as presented in the provided content.*

### Annex IV. Recent Trends in Poverty and Inequality in Namibia

### Annex IV. Recent Trends in Poverty and Inequality in Namibia

### A. Introduction — overall trends and fiscal context
- Poverty declined from 28.8 percent in 2009/10 to 17.4 percent in 2015/16.
- Economic inequality (Gini coefficient) declined from 0.58 to 0.56 between 2009/10 and 2015/16.
- The authorities spend around 2 percent of GDP annually on social safety nets.
- Namibia remains one of the most unequal countries in the world despite these improvements.

### B. Recent developments — distributional dynamics, urbanization, education, wealth, employment, child and urban poverty
- Consumption growth by distribution segments (average real growth rates since 2009/10):
  - Median to 90th percentile: about 8.8 percent.
  - Bottom half of households: 6.5 percent.
  - Top decile: 4.9 percent.
  - Bottom 10 percent: 3 percent.
- Changes in relative consumption:
  - Median household consumes 3.5 times more than a household in the 10th decile, up from 2.8 times in 2009/10.
  - 90th percentile consumes 4.3 times more than the median household, down from 4.9.
- Urbanization and its effects:
  - Share of population living in urban areas increased from 37.9 percent in 2009/10 to 46.9 percent in 2015/16.
  - Urban areas: average real consumption growth for the bottom half of urban households ~5.7 percent; for the top decile ~1.5 percent.
  - Migrants are mostly young adults; almost twice as many people age 30–34 live in urban areas as in rural areas (ratio increased since 2009/10).
- Education and labor income concentration:
  - Share of household heads with primary education or less declined from 48.6 percent in 2009/10 to 46.3 percent in 2015/16.
  - Wage premium for tertiary education (compared to primary) has declined.
  - The top decile receives two thirds of total labor income.
  - In pre-tax market income: top decile gets 73 percent of national income (compare: 65 percent in South Africa; 54 percent in sub-Saharan Africa).
- Wealth inequality:
  - Wealth Gini coefficient: 0.82 (compared to consumption Gini of 0.56).
  - Richest decile has 12 times the wealth of the median household and more than 500 times the wealth of the poorest decile.
  - Wealth composition: poor households — durables and agricultural wealth; rich households — mostly real estate.
- Employment and poverty:
  - Labor income share by decile: on average 22 percent of income for households in the lowest decile; 71 percent for the richest households.
  - Poverty rate among households whose head is full-time employed: 7.6 percent.
  - Poverty rates by employment type:
    - Heads employed for a wage in agriculture: 18.3 percent.
    - Heads employed in non-agriculture activities: 5 percent.
    - Self-employed heads: 9.2 percent.
- Rural vs urban and relative poverty:
  - Absolute poverty: ~25 percent of rural households spend less than the national poverty line; <10 percent for urban households.
  - Relative poverty (area-specific median): urban poor account for 30.3 percent of the population; rural relative deprivation is 27.0 percent.
  - Households spending less than the food poverty line: same fraction in urban and rural areas.
  - Only a quarter of government spending on direct social transfers flows to urban areas.
  - Demographics: 70 percent of older adults and 61 percent of children live in the countryside.
- Child poverty:
  - Child poverty declined from 34 percent in 2009/10 to 20.6 percent in 2015/16.
  - Overall poverty in 2015/16: 17.4 percent.
  - Survey indicates over 170,000 poor children are not benefiting from the child grant.
  - Children in rich households have lower primary and secondary education dropout ratios than children in poorer households.

### C. Fiscal policy in Namibia — current effects and scope for improvement
- Overall fiscal impact:
  - Without fiscal policy, poverty rate would be 21.1 percent instead of 17.4 percent.
  - Without fiscal policy, Gini coefficient would be 0.62 instead of 0.56.
- Progressivity and effectiveness of instruments:
  - Housing subsidy component of the Building Together Program (BTP) is the most progressive and effective instrument (Kakwani index).
  - National Housing Enterprise housing subsidy is among the least progressive.
  - Direct transfers: foster parents and disability grants are very progressive; veterans’ grant is the least progressive direct transfer.
  - Public health expenditures are progressive.
  - Education spending progressivity declines with level; tertiary education spending is regressive.
  - Tax instruments: personal income tax (PIT) and excises are mildly progressive; VAT is somewhat regressive.
- Personal income tax (PIT) changes:
  - 2013 PIT reform reduced rates at every income level; richer households benefited relatively more.
  - Kakwani index for PIT declined from 0.20 to 0.19.
  - In Namibia, tax rates on low-income households are higher than in South Africa, and lower for high-income households.
- Direct transfers expansion and targeting:
  - Direct transfers spending increased from 1.6 percent of GDP in 2009/10 to 2 percent in 2015/16.
  - Coverage of the poorest quantile rose to 49 percent (from 33 percent in 2009/10).
  - South Africa coverage benchmark: 86 percent.
  - Half of the increase in direct transfers went to the old age pension, granted to all Namibians older than 60 regardless of income.
  - Old age pension impacts: reduces poverty by 19.1 percent and inequality by 2.0 percent; cost is 1.3 percent of GDP and accounts for over 60 percent of spending in direct transfers.
- Impact and cost of direct transfers (selected figures, 2009/10 vs 2015/16):
  - All Direct Transfers — Reduction in Poverty Headcount: 3.6 → 2.7; Reduction in Gini coefficient: 5.0 → 3.5; Cost: 1.6 → 2.0 (% of GDP).
  - Old age pension — Reduction in Poverty Headcount: 2.4 → 1.9; Reduction in Gini: 3.6 → 2.0; Cost: 1.0 → 1.3 (% of GDP).
  - Children’s grant — Reduction in Poverty Headcount: 0.6 → 0.4; Reduction in Gini: 0.5 → 0.5; Cost: 0.2 → 0.4 (% of GDP).
  - Foster parents’ grant — Reduction in Poverty Headcount: 1.9 → 3.0; Reduction in Gini: 0.2 → 0.3; Cost: 0.1 → 0.0 (% of GDP).
  - Disability grants (adults and children) — small reductions in poverty and Gini; costs between 0.0 and 0.2 (% of GDP).

### D. Policy options and quantified simulations — measures to enhance distributional outcomes
- Children’s grants and old age pensions:
  - Doubling coverage of children’s grants from 180,000 to 360,000 children would:
    - Reduce poverty by 1.8 percent.
    - Reduce inequality by 0.3 percent.
    - Cost around 0.4 percent of GDP.
  - Introducing weak means-testing to old age pension (exclude top 25 percent richest households by income) could save 0.1–0.3 percent of GDP, with no noticeable impact on inequality but possibly somewhat increasing poverty.
- Housing subsidies:
  - Improving targeting and doubling coverage of the housing subsidy component of the BTP would reduce poverty, particularly in urban areas, at a very low fiscal cost.
- Personal income tax (PIT):
  - Raising the top marginal rate to 39 (from 27 percent) and creating an additional income bracket for income greater than N$ 2.5 million taxed at 40 percent would:
    - Reduce the Gini coefficient by 0.3 percent.
    - Raise about 0.2–0.5 percent of GDP in fiscal revenue.
- Indirect taxation (VAT zero-rates):
  - Removing zero-rating for residential utilities and fuel products could increase revenues by about 0.1–0.6 percent of GDP; revenues could be used to offset negative distributional effects by expanding social programs.
- Housing taxation (property tax):
  - A property tax of about 3½ percent on the value of the top 10 percent most expensive properties would reduce the Gini coefficient by 0.1 percent, with limited revenue effects.
- Selected simulated policy impacts (table highlights):
  - Raise top marginal rates of PIT: Poverty headcount change 0.0; Urban poverty 0.0; Child poverty 0.0; Gini -0.3; Revenue effect 0.2 - 0.5 (% of GDP).
  - Remove VAT zero-rate for utilities: all reported changes 0.0; Revenue effect -0.1 (% of GDP).
  - Remove VAT zero-rate for fuel products: Poverty headcount 0.4; Child poverty 0.4; Revenue effect 0.1 - 0.5 (% of GDP).
  - Introduce means testing in old age pension: Poverty headcount 0.3; Urban poverty 0.8; Child poverty 0.2; Gini 0.0; Revenue effect 0.1 - 0.3 (% of GDP).
  - Double coverage of children’s grant: Poverty headcount -1.8; Urban poverty -4.7; Child poverty -8.1; Gini -0.3; Revenue effect -0.4 (% of GDP).
  - Improve targeting and double coverage of housing subsidy: Poverty headcount -0.1; Urban poverty -0.3; Child poverty 0.0; Gini 0.0; Revenue effect 0.0 (% of GDP).

*Source: 1namea2019001 - Annex IV. Recent Trends in Poverty and Inequality in Namibia.*

### 1.      Over the past decades, total factor productivity growth in Namibia has been on a

### 1namea2019001 - 1.      Over the past decades, total factor productivity growth in Namibia has been on a

### Overview and key findings
- Total factor productivity (TFP) growth in Namibia has been on a declining trend and is constraining the growth potential of the economy.
- During 1994–2015, real GDP growth averaged about 4 percent (excluding the global financial crisis period).
- Growth was stronger during 2010-2015 due to expansionary fiscal policies and construction of large mines, but demand-driven growth masked low economic efficiency and declining TFP (Panel 1).
- With limited fiscal space and no large private investment projects in sight, low productivity growth will hold back future growth prospects.
- Reviving productivity is central to Namibia’s growth and development.

### Structural drivers and comparative performance
- Cross-country evidence indicates institutional framework, quality of infrastructure, financial market development, market regulatory and business environment matter for TFP growth; relevance varies by income group.
- Namibia ranks better than the median of sub-Saharan African (SSA) countries and better than the median of emerging market economies in several Global Competitiveness Index (GCI) pillars, including institutional framework, financial market development, and infrastructure.
- Namibia’s competitiveness and governance indicators have deteriorated since the early 2000s:
  - Deterioration in GCI ranking driven by sub-indicators: higher educational attainments, ease of starting a business, macroeconomic environment, and access to sizable markets.
  - Regulatory quality for private sector development deteriorated due to perceived increases in administrative burdens, red tape, and barriers to entry based on unfair competition practices.
- Namibia now ranks behind other comparable countries in areas key to productivity growth: level of education of the labor force, macroeconomic and business environment, and ability to harness technological advances.
- Access to sizable markets (market size) plays a special role in boosting productivity; market size can be expanded by opening up to trade.

### Quantifying effects of structural reforms on productivity and growth
- A production function approach (following Lusinyan (2018)) separates reforms’ effects on productivity (TE), capital (K), and labor (L):
  - ∆llll Y = (1−α)∆llll TE{z} + α∆llll K{z} + (1−α)∆llll L{z}
  - z denotes key structural indicators; TE denotes total factor productivity measured using stochastic frontier analysis.
- Results indicate the largest impact on growth from changes in z occurs through productivity, with the regulatory quality indicator also affecting capital accumulation and use of labor.
- Focusing on indicators where Namibia lags EM medians—technological readiness, goods market efficiency, and regulatory quality—halving the distance to the median emerging market economies in these areas could:
  - Increase GDP by about 40 percent over time.
  - Boost average GDP growth during the adjustment period by about 1¾ percentage points.
- Assumption used for illustration: structural reforms take 20 years to reduce half of the distance to the median emerging economy.
- While marginal improvements in higher education indicators are limited, the distance to the frontier is large, indicating wide room for improvement; policies to increase human capital and effective hours worked should be pursued.

### Policy recommendations and prioritized reforms (multi-pronged approach)
- Improving the business regulatory environment
  - Simplify procedures for starting a business by launching the planned platform for online business registration.
  - Facilitate trading across borders by expediting implementation of the National Single Window.
  - Accelerate review of amendments to the Investment Promotion Act and other business regulatory changes.
  - Ensure a stable and predictable business regulatory framework by accelerating review of the Investment Promotion Act, revising tax incentive schemes, clarifying empowerment policies, and defining land reform policies.
  - Simplify procedures for obtaining and renewing work permits for foreign high-skilled labor (e.g., expedite work visas for applicants from major trading partners).
  - Simplify procedures for starting a business, including reducing requisites in the Companies Act for manual submission of forms.
  - Expedite launch of planned platform for online business registration.
  - Accelerate reforms in public procurement (enhance transparency, competition, timeliness).
- Enhancing product market efficiency
  - Improve operational efficiency of public enterprises in key industries (e.g., electricity, transportation).
  - Facilitate private sector participation (e.g., accelerate introduction of the Modified Single Buyer Model in the electricity sector).
  - Facilitate private sector participation in telecoms and access to existing infrastructure for new operators (finalize infrastructure sharing guidelines).
  - Expedite implementation of the National Single Window to facilitate trading across borders.
- Technological readiness
  - Roll out government e-services (online tax filing, online business registration, online provision of certificates, access to public information).
  - Improve ICT literacy and digital skills in the population.
  - Improve affordability, speed and access to broadband services; expand network coverage and establish public access points in rural areas.
  - Improve technological adoption and further promote delivery of government e-services.
- Higher education, training, and availability of skills
  - Facilitate work permits for high-skilled foreign workers and identify priority training areas in consultation with industry to accredit new training programs.
  - Strengthen vocational and on-the-job training (internship and apprenticeship programs) to help graduates gain work experience and lower-skilled workers validate skills.
  - Improve access and quality of higher education (review tuition costs) and strengthen curricula in basic education.
  - Identify priority training areas in consultation with industry and accredit new training programs accordingly.

### Growth accounting and empirical evidence (stochastic frontier panel estimates)
- Sample: 178 countries (34 Advanced Markets, 40 Emerging Markets, 104 Low-Income and Developing Countries), covering 1970-2018.
- Data sources: IMF WEO, Penn World Tables, World Bank WDI, Global Competitiveness Indicators, Worldwide Governance Indicators.
- Stochastic frontier approach used to estimate effects of structural indicators on productivity; Battese and Coelli (1995) conditional mean model applied.
- Selected regression estimates (panel estimation for productivity; coefficients and significance preserved exactly):
  - Frontier (lnempl): 0.21*** (z-statistics in parentheses: (20.23) / (20.43) / (20.20) across specifications)
  - Frontier (lnkstock): 0.78*** (z-statistics: (89.39) / (88.54) / (89.43))
  - Mu (Regulatory quality): 0.02* / 0.02* / 0.03** (z-statistics: (1.79) / (1.92) / (2.37))
  - Mu (Macroeconomic environment): 0.03*** / 0.03*** (z-statistics: (3.01) / (2.94))
  - Mu (Higher education and training): -0.03* / -0.03* / -0.04** (z-statistics: (-1.88) / (-1.82) / (-2.26))
  - Mu (Goods market efficiency 1/): 0.01 / 0.01 / 0.01 (z-statistics: (0.95) / (0.91) / (1.16))
  - Mu (Technological readiness): 0.03* / 0.04** / 0.06*** (z-statistics: (1.72) / (1.98) / (2.83))
  - Mu (Market size 2/): 0.05*** / 0.05*** / 0.06*** (z-statistics: (3.90) / (3.74) / (3.85))
  - Mu (Business sophistication): 0.00 (z-statistic: (0.39))
  - Constant terms reported as -1.44*** and -14.81*** / -14.76*** / -15.31*** (z-statistics shown)
  - Observations: 1,242 (Number of ifscode: 145)
  - Significance notation: *** p<0.01, ** p<0.05, * p<0.1
- Notes on measures:
  - Goods market efficiency measured by number of days to start a business.
  - Market size measured by domestic market size.

### Implications
- Structural reforms that improve technological readiness, goods market efficiency, regulatory quality, macroeconomic stability, and higher education can substantially raise Namibia’s TFP and long-term GDP.
- A combination of reforms is likely more powerful than single-policy actions due to complementarities; some interventions yield short-term productivity gains (e.g., online business registration, National Single Window), while others require sustained effort (e.g., higher education improvements, broadband expansion).
- Reforms should aim to reduce reliance on demand stimulus and enable the private sector to lead growth and employment.

*Source: IMF staff estimates.*

### Annex VI. Export Competitiveness and Regional Integration

### Annex VI. Export Competitiveness and Regional Integration

### A. Declining export performance and market shares
- Export contribution to GDP has been falling sharply since the global financial crisis despite policy efforts (authorities' “Vision 2030” aims to increase high added-value exports, particularly processed goods, to 70 percent of total exports by 2030).
- Exports growth (excluding re-exports):
  - +17 percent during 2004–08
  - 5 percent during 2009–12
  - Turned negative during 2013–17
- Non-mineral exports fell by 40 percent compared to 2012 due to price and volume effects.
- Re-exports share in total exports increased to 25 percent over 2014–17.
- Constant Market Share Analysis (CMSA) findings:
  - After accounting for commodity composition and market distribution effects, Namibia’s adjusted market share has been declining, indicating a competitiveness effect (residual) that points to broader loss of competitiveness across products and markets.
- Exports of services:
  - Since 2014 exports of services in US dollar terms declined by about 40 percent (2.3 percent of GDP), particularly travel, transport and other services to firms.
  - Tourist arrivals indicate gradual market-share gains from countries like Botswana, aided by a more competitive exchange rate.

### B. Export structure, diversification limits, and regional integration
- Export concentration and composition:
  - Mineral products account for around 60 percent of total exports (diamond, uranium, gold, processed metals including copper blisters and refined zinc).
  - Non-mineral exports are mostly food products (fish, live animals and meat, beverages and grapes).
  - Non-mineral non-food products' share in total exports fell to less than 5 percent in 2017 from a maximum of 15 percent in 2009.
- Product space and diversification prospects:
  - “Classic” and “emerging” products (e.g., malt, pasta, leather) lie in the periphery of the product space with limited connectivity to more sophisticated products; limited success in developing comparative advantage in the product-space core (clothing apparel, chemicals, transport equipment).
- Regional integration:
  - Namibia’s share in total intra-African exports increased to 2.9 percent in 2017 from 2.2 percent in 2010.
  - Regional integration gains have been driven mostly by mineral products and re-exports.
  - Exports to South Africa remain focused on primary commodities and end-sales products with very little intra-industry manufacturing trade.
  - Exports to Angola (which has not applied SADC’s rules yet) have sharply declined in recent years.

### C. Factors hampering export competitiveness
- Exchange rates, wages, and productivity:
  - Standard CPI-based REER has depreciated, but the REER deflated by unit labor costs (ULC) in manufacturing appreciated since 2010 by 48 percent (33 percent since 2013), contributing to loss of market share.
  - Causes noted:
    - More than one third of non-mineral exports are to South Africa (no exchange rate impact), another third with the Euro zone (euro depreciated vs. US dollar).
    - Gains in relative wages did not offset a widening productivity gap, exacerbated since 2015 by nominal rigidities and spillovers from fast-growing public sector wages.
- High and rising labor costs and skills shortages:
  - Namibia wages are relatively high compared to peer medians, especially for high and specialized skills (plant and machines operators, technicians and associate professionals, professionals).
  - Median wages for highly educated and specialized workforce are high even relative to South Africa.
  - Wages remain competitive for low and abundant skills but higher than in some lower-income African countries (Ethiopia, Tanzania, Uganda).
  - Large skills wage premium is associated with lower unemployment for high-skilled workers and reflects skills shortages/mismatches, competition from public sector, restrictions on work permits, and tight access regulations for some professions.
- Costly production inputs and utilities:
  - Electricity tariffs are one of the highest in the SADC region, on average 20–25 percent higher than in South Africa.
  - Electricity tariffs are cost-reflective; high generation, transmission and distribution costs reflect low population density and low utilization of capacity.
  - High grid reliability in peak periods raises generation costs.
  - Possible contributing factors: high wages in the sector (22 percent of NamPower value added) and inefficiencies at distribution level.
  - Electricity market liberalization underway: the Electricity Control Board prepared a national strategy to promote IPPs, plans to eliminate the single buyer policy during the current year to allow IPPs to sell power directly.
- Transport, logistics, and infrastructure:
  - Namibia ranks 79 in 2016 in the Logistics Performance Index from 152 in 2010; road infrastructure quality is very good, but rail infrastructure is obsolete and accounts for only 8–10 percent of total transport.
  - Aging railway infrastructure, low demand for value-adding infrastructure and logistics services, restrictive trucking and backhauling regulation, and inefficient state monopolies keep transport unit costs high.
  - Remoteness and dependence on imports force firms to hold higher inventories and incur larger financing costs.
  - TranSamib launched a 5-year strategic investment plan (NAD 2.5 billion) to upgrade locomotives and rails to raise market share to 30 percent.
- Trade facilitation and customs:
  - Exports face one of the highest customs documentary and compliance costs in the SADC region.
  - Exporters also pay documentary and compliance fees for imports in partner countries (notably high in South Africa and Angola).
  - Long waiting times and lack of harmonized and predictable border procedures create significant additional costs, disproportionately affecting SMSs.
- Broadband and digital connectivity:
  - Data costs are high in absolute and relative terms; Namibia ranks 147 out of 187 for fixed broadband affordability and has one of the highest costs in the SADC region.
  - Lack of competition in fixed broadband market dominated by a public company; authorities announced partial privatization of this company.

### D. Policy implications and priorities highlighted in the annex
- Priority to export competitiveness as fiscal consolidation reduces domestic demand and the role of exports in supporting growth increases.
- Key policy areas identified to boost competitiveness and deepen regional integration:
  - Improve productivity to close the wage-productivity gap, including addressing skills shortages and labor market mismatches.
  - Continue electricity sector liberalization to reduce tariffs and encourage IPP participation, including eliminating the single buyer policy.
  - Upgrade and modernize transport and rail infrastructure to reduce transport costs; implement TranSamib investment plan (NAD 2.5 billion) to raise rail market share to 30 percent.
  - Reduce customs documentary and compliance costs and harmonize border procedures with neighbors to lower trade costs for exporters, especially SMSs.
  - Increase broadband competition and reduce data costs, including partial privatization of the public broadband company.

*Prepared by T. Jardak, Y. Li and S. Rehman.*

### 15.      The business environment in Namibia appears to have deteriorated in recent years and

### 1namea2019001 - 15.      The business environment in Namibia appears to have deteriorated in recent years and

### Business environment and ease of doing business
- Namibia ranked 107 out of 190 in the World Bank’s ease of doing business in 2019, from number 78 in 2012.
- Namibia now lags behind Mauritius, South Africa and Botswana (respectively, 20, 82, 87 in 2019).
- Starting a business in Namibia is described as a long, costly and cumbersome process.
- Insolvency regime frameworks are relatively weak, discouraging both domestic and foreign investments.
- The authorities plan to implement the national single window and the virtual one stop shop, which should be operational in 2019–20 and contribute to enhancing the country ranking.

### Non-tariff barriers and trade integration
- Widespread non-tariff barriers and domestic market protective policies stymie deeper regional integration and the development of regional value chains.
- Namibia uses several non-tariff measures to protect “infant” industries and give preferential treatment to local suppliers; measures tend to:
  - support import-substitution,
  - target traditional products rather than modern export sectors,
  - lack monitorable indicators and sunset clauses.
- Local content requirements distort factor allocation toward the non-tradable sector and hinder long-term export competitiveness.
- Export promotion efforts have been dispersed and sometimes limited (example: the export-processing zones regime does not allow exporting more than 30 percent to SADC countries).
- South Africa’s industrial and domestic market protective policies (extensive industrial rebates, high local content requirements, complex rules of origin) significantly affect Namibia’s export opportunities to the region’s largest market.
- The absence of a regional body to set rebates, exceptions and export-import related regulations appears to hinder smaller countries’ ability to develop regional exports.
- Lack of harmonized technical regulations and standards in the region:
  - national rather than regional or international standards prevail,
  - regimes often rely on mandatory inspections and certifications,
  - overlapping regulatory responsibilities and heavy government involvement create additional barriers, especially when applied discriminatorily against imports.

### Summary of trends in competitiveness and exports
- Since 2009–10, external competitiveness and exports contribution to growth in Namibia have been declining.
- Market shares have lowered; export structure remains dominated by primary commodities with little room for upgrade and vertical integration.
- Integration in regional value chains has been very limited.
- Contributing factors to decline include:
  - lagging cost competitiveness (e.g., rising real exchange rates, costly production inputs),
  - deteriorating non-price competitiveness (deteriorating business environment, lagging innovation and technological readiness),
  - similarity in productive base with neighboring countries,
  - complex rules of origin and local content requirements,
  - other non-tariff barriers and lack of harmonized standards and coordinated policies and strategies.

### Policy recommendations (short-term and longer-term)
- Fiscal policy
  - In the context of the peg to the rand, fiscal policy should support external competitiveness.
  - Contain salary dynamics in the public sector (central government and public enterprises) to align wage dynamics to productivity trends and reduce pressures on private sector wages, especially for high skills.
  - Reform and strengthen market operations of public enterprises and liberalize some key network services to allow more cost-effective services and reduce transaction costs.
- Skills and labor market
  - Short-term: ease restrictions on skilled foreign labor hiring and implement active labor market policies (e.g., upgrading existing workforce skills, unemployment registry).
  - Reassess self/state regulation of some professions.
  - Medium/long-term: tailor education and vocational training to private sector needs with greater focus on digital skills; improve quality and inclusiveness of education.
- Trade facilitation
  - Upgrade trade-supporting infrastructure (e.g., rails) and reduce delays and costs of customs procedures.
  - The gateway strategy, if successful, could alleviate scale problems and reduce transport and logistics costs.
  - Promote geographic clusters with high skill requirements close to export gateways and destination markets to foster development and exports.
  - At the regional level, harmonize regulations and standards and coordinate policies, including through creation of regional bodies, to promote regional value chains.
- Business environment
  - Re-establish previous levels and improve the business environment as a top government priority.
  - Address long and costly processes of starting a business, construction permits, and property registration to capitalize on strengths (good governance, reliable infrastructure).
- Development policies
  - Prioritize development of a vibrant and independent private sector.
  - Design development policies to address market failures, account for natural disadvantages (e.g., remoteness), and leverage complementarities within the region.
  - Avoid policies supporting import substitution or carrying anti-export bias; coordinate policies at the regional level where possible.
  - Improve competitiveness in services as a cornerstone of export diversification.

### Macro-financial risks in a highly interconnected financial system
- Intersectoral exposures rose at end-2018 to an estimated 442 percent of GDP, from 395 percent of GDP in 2016.
- Namibia’s net international investment position (NIIP) in 2018 was broadly balanced; gross foreign assets stood at approximately 85 percent of GDP.
- Most financial interconnectedness is between domestic sectors, reflecting a very large nonbank financial institutions (NBFI) sector (including the Government Institutions Pension Fund (GIPF)) and increasing domestic government debt mostly held by the financial sector.

Findings on banking sector and NBFIs
- Banking sector
  - At end-2018 approximately a third of banks’ liabilities were wholesale funding (intra-financial system linkages, mostly NBFI placements).
  - At end-2018, liquid assets (as defined by BoN’s regulations) stood at 33 percent of wholesale funding and at 28 percent of total short-term liabilities.
  - Credit-side risks include highly concentrated loan books (counterparty and asset classes) and highly leveraged households.
- NBFI sector
  - Size of the NBFI sector is approximately 150 percent of GDP, excluding double counting of assets under management.
  - Households have an aggregate claim on NBFIs of approximately 80 percent of GDP (half GIPF liabilities to members; the remainder are other long-term investments in insurance and private pension liabilities).
  - NBFIs repatriated investments: foreign share of invested assets declined from approximately 2/3 at end-2016 to just below half at end-2018.
  - Repatriated funds were mainly invested in government securities; NBFIs also hold sizeable corporate loans and securities.
  - Through large holdings of foreign securities and mark-to-market valuation, NBFIs are exposed to external valuation shocks related to asset price fluctuations and interest rate normalization in advanced economies.

Strengthening sovereign-financial sector nexus
- At end-2018 the domestic financial sector held sovereign securities amounting to 30 percent of GDP (11 percent of GDP held by banks and 19 percent of GDP held by NBFIs), up from 14 percent of GDP at end-2016.
- Increase driven by NBFIs as domestic asset requirements for institutional investors were progressively increased from 35 percent in 2016 to 45 percent.
- The Bank of Namibia (BoN) enacted an assets swap program with the GIPF (about 3 percent of GDP), swapping a portfolio of BoN’s securities with foreign-denominated assets held by the GIPF.
- Banks’ holdings of treasury bills form the bulk of banks’ liquid assets (approximately N$ 16 billion, or 90 percent of liquid assets at end-2018).
- NBFIs with longer investment horizons hold the bulk of longer-term securities and are exposed to potential large balance sheet valuation changes.

Transmission channels and adverse macro-financial loops
- Two key adverse loops identified:
  - Price shock on NBFIs’ foreign assets:
    - Losses on foreign assets could lead NBFIs to cover losses using domestic liquid assets, triggering sudden withdrawal of wholesale funding from banks and causing liquidity shortfalls and deleveraging pressures.
    - NBFIs also hold debt securities issued by domestic banks; valuation losses could force further NBFI losses and liquidity withdrawals, with real effects through credit rationing.
  - Macro-financial “doom” loop from holdings of government securities:
    - Large holdings of government debt in a highly illiquid market could cause system-wide losses; drawdown of NBFI buffers could trigger wholesale funding withdrawal from banks, simultaneously causing funding losses and balance sheet losses on banks’ holdings of government debt.

*Source: IMF staff report excerpt (Namibia).*

### Annex VIII. Implementation of the 2018 FS

### Annex VIII. Implementation of the 2018 FS

### Financial Sector Oversight Framework
- Recommendations and responsible authorities: Financial Sector Oversight Framework — Ministry of Finance (MoF)/BoN/NAMFISA; priority: I (Immediate).
- Key implementation developments:
  - The Banking Institutions Bill has been approved by Cabinet and is awaiting presentation to parliament.
  - The Deposit Guarantee Act has been promulgated. Parts 1–3, 9–10 were operationalized in May 2019. A working group team is working to ensure that all mechanisms are in place to operationalize the Act.
  - The FIM, NAMFISA, Financial Services Adjudicator bills were tabled in parliament in June 2019.
  - The Microlending Act has been promulgated.
- Joint Prudential Supervisory Engagement Framework:
  - Responsibility: BoN/NAMFISA; priority: I.
  - The Framework has been signed by the BoN Governor and the CEO of NAMFISA and implemented in June 2019 with the application on the first banking group consolidated supervision approach.
- Macroprudential mandate and data gaps:
  - Responsibility: MoF/BoN/NAMFISA; priority: I.
  - Amendments to the Bank of Namibia Act have been presented to Parliament and are with the Parliament Committee for inputs; amendments include assigning the macroprudential mandate to the BoN.
  - The BoN will consider possible extensions of the macroprudential toolkit when the macroeconomic situation improves.
  - BoN has started collecting mortgage data from the domestic systemically Important banks. This is a continuous exercise.

### Banking Sector Oversight
- Strengthen liquidity regime ahead of LCR and NSFR implementation:
  - Responsibility: BoN; priority: I.
  - A revised BID-6 to include behavioral adjustments at point of industry consultation was issued in September 2018 and is expected to be implemented in September 2019. The issuance was delayed because of challenges with system adjustments, and to allow banks to adjust their policy and IT reporting systems.
- Loan classification and Asset Quality Review:
  - Responsibility: BoN; priority: I.
  - A circular on interpretation on existing regulations was issued in July 2018. It replaces the initial proposal of having external audits. The new circular was expected to be implemented by June 2019; implementation delayed due to further consultations. A replacement circular will be issued over the next months.
- Concentration limits:
  - Responsibility: BoN; priority: I.
  - The concentration limits have been reduced from 30 percent to 25 percent of capital.

### Nonbank Financial Institutions and Capital Markets
- Strengthen NAMFISA accountability and transparency:
  - Responsibility: MoF/NAMFISA; priority: NT (near term).
  - NAMFISA publishes its annual report and a two-year business plan on regular basis and runs satisfactory surveys since 2016. No new action to strengthen the framework has been taken.
- Introduce electronic CSD, repo operations, and OTC reporting:
  - Responsibility: NAMFISA; priority: I.
  - Provisions for regulation of the CSD are in the FIM Bill, which is drafted and waiting for presentation to parliament.

### Crisis Preparedness and Management
- Special resolution regime for banks and nonbanks:
  - Responsibility: BoN/NAMFISA; priority: I.
  - The Banking Institutions Bill envisages the creation of a special resolution regime.
  - NAMFISA is conducting a gap analysis study on crisis regimes best practices to be completed in March 2020.
- Recovery and resolution planning for the four largest banks and holding companies:
  - Responsibility: BoN; priority: I.
  - This requirement is addressed as part of the Banking Institutions Bill (waiting for presentation to parliament).
- Deposit Guarantee Scheme:
  - Responsibility: MoF/BoN; priority: NT.
  - The Deposit Guarantee Act has been approved; according to the Act the deposit guarantee scheme should compensate small depositors in the event of bank failure. A working team has been set to support implementation.
- Operationalize ELA on short notice:
  - Responsibility: BoN; priority: I.
  - Implementation status: No action.

### Financial Market Infrastructure
- Focus FMI oversight on systemic risk, operational risk, and cyber resilience:
  - Responsibility: BoN; priority: I.
  - Cyber Security Resilience is progressing. BoN introduced the Determination on Information Security and is issuing a circular clarifying expectations and industry-wide incident reporting aspects.
  - An internal memo highlighting actionable items per FSAP recommendations was developed and approved. The Risk-Based Oversight Policy Framework is being revised to reflect the memo’s recommendations.

### Development Issues
- Re-assess SOFI mandate and restructure Agribank:
  - Responsibility: MoF; priority: I.
  - No action taken apart from a sensibilization campaign. BoN’s Banking Supervision Department presented to the Agribank Board on the “Determination on Asset Classification, Interest in Suspense and Provisioning” to solicit inclusion in Agribank’s revised Policy approved by the Board.

*Note: I (Immediate), within one year; NT (near term), one–three years; BoN, Bank of Namibia; MoF, Ministry of Finance.*

---

### Capacity Development Summary

### Background
- Namibia is a small, commodity-dependent economy with:
  - Annual per capita GDP growth averaged 2.6 percent over the last two decades.
- Recent macroeconomic context and challenges:
  - After exceptional growth and rising macroeconomic imbalances, the economy began rebalancing in 2016 and growth came to a halt.
  - Public debt remains on a rising path, and international reserves are below adequate levels.
  - Persistent issues: slowing productivity growth, declining competitiveness, high income inequality, and high unemployment.

### Capacity Development Assessment
- Implementation of past macroeconomic advice:
  - Positive overall: external debt issued in 2015; medium-term fiscal adjustment plans from 2016.
  - In 2017, LTV ratios adopted to manage real estate market risks.
  - Following FAD TA, plans developed to close tax loopholes and review tax incentive schemes.
  - Wage bill contained via temporarily suspending inflation adjustments and a cabinet decision to limit new hires.
  - Progress on governance of extra-budgetary entities and public enterprises; intent to privatize a telecom entity.
  - Progress toward creating a semi-autonomous revenue authority, scheduled for 2019.
  - Development of a fiscal risk management framework underway, but fiscal risks statement not yet published.
- Implementation on legal PFM framework: limited.
- FY19 TA: broadly adequate but low intensity; focus areas: PFM and macro-fiscal capacity, fiscal risks, financial and monetary sector, revenue administration, statistics.
- Going forward TA focus areas: macro-financial issues (follow up to 2018 FSAP), supporting fiscal consolidation (including revenue authority), improving national and fiscal accounts.

### Capacity Development Priorities
- Fiscal and PFM objectives:
  - Strengthen macro-fiscal forecasting capacity underlying the budget and medium-term fiscal projections.
  - Improve the budget formulation process.
  - Improve monitoring and management of fiscal risks and produce a fiscal risks statement.
  - Rationalize transfers to extra-budgetary entities and public enterprises, and strengthen their management.
- Tax policy and revenue administration objectives:
  - Implement already identified tax policy reforms.
  - Improve revenue administration processes ahead of introducing a revenue authority, particularly audit functions.
  - Support the creation of a revenue authority.
  - Strengthen core customs and tax functions.
- Financial Stability objectives:
  - Update the liquidity regulatory framework.
  - Revamp conduct of monetary policy and liquidity management operations.
  - Develop stress testing capacity for pension funds and insurance companies and strengthen existing framework for banks.
  - Update capital requirement regulation for pension funds.
  - Follow up on other key issues from the 2018 FSAP, including NBFI supervision and crisis management preparedness.
- Data availability and statistical capacity objectives:
  - Improve availability, reliability, and coverage of fiscal data.
  - Refine national accounts, including quarterly data, and price indexes.
  - Improve reliability of FSIs, expand coverage of NBFIs in monetary statistics.

### Authorities’ Views
- Authorities value Fund TA and seek advice in PFM, revenue administration, expenditure management, financial sector supervision and regulation, and statistics.
- Authorities suggested CD activities could achieve greater results through hands-on support, resident advisors, peer-to-peer exchange, and comparisons with international best practices.

---

### Appendix II — Implementation of Past IMF Advice (Selected Developments)

### Fiscal and PFM
- Bring public debt to a sustainable path and preserve macroeconomic stability:
  - Medium-term fiscal adjustment targets defined; large spending reductions introduced through lowering non-wage recurrent expenses and capital outlays.
  - In 2018/19, the wage bill declined for the first time in a last decade due to zero-inflation adjustment and net staff reduction. Social spending largely preserved and key cash transfers increased.
- Expand tax bases and close loopholes:
  - SACU revenue on a declining path; domestic revenue recently declined. Limited revenue-increasing measures introduced; some measures being considered for FY20/21.
- Strengthen PFM framework and fiscal risk management:
  - Efforts ongoing, partly supported by Fund TA. A PPP legal framework approved by Parliament and regulations issued in December 2018. Initiatives to finance investment spending off budget remain of concern.
- Revenue administration reforms:
  - New IT system (ITAS) implemented. Progress toward Namibia Revenue Authority Agency scheduled for 2019, with GIZ and IMF support.
- Preserve peg with the rand:
  - Objective: Maintain BoN rate broadly in line with the SARB’s policy rate. The BoN has been able to tailor, to some extent, the policy rate to better fit the cyclical position of the economy.

### Labor, Education, and Business Climate
- Address unemployment and income inequality:
  - Authorities introduced universal secondary education; efforts to improve TVET image and introduced an apprenticeship program.
- Improve business climate:
  - Presidential Harambee Prosperity Plan (2016–17) introduced; some governance progress made. Amendments to the Investment Promotion Act planned to be tabled in Parliament this year. E-services rollout and online business registration platform launching.

### Social Programs
- Better targeting of social programs:
  - Key cash transfers increased. Preparatory work underway with World Bank support to improve targeting of some transfers.

### Financial Sector Resilience (see Annex VIII)
- Strengthen banking supervision:
  - Update liquidity risk framework; strengthen enforcement of loan classification; improve forward-looking risk assessments; align concentration limits to best practices.
  - Developments: concentration limits reduced from 30 percent to 25 percent of capital; BoN issued a circular to clarify classification rules; TA provided dynamic stress testing tool. Progress in upgrading liquidity framework faced implementation challenges.
- Enhance NBFI oversight:
  - Expedite upgrade of regulatory framework; introduce electronic CSD, repo operations, and reporting of government bond OTC trades.
  - Developments: With the exception of the micro-lending bill, several bills have yet to be presented to parliament.
- Strengthen macroprudential policy framework:
  - Amendments to BoN Act presented to Parliament assigned macroprudential mandate to BoN. Joint Prudential Supervisory Engagement Framework signed and implemented. BoN to consider further toolkit extensions when macroeconomic situation improves.
- Crisis management and resolution:
  - Deposit Guarantee Act approved. Resolution framework to be addressed as part of the Banking Institutions Bill.
- Address information and data gaps:
  - Develop household and corporate surveys (BoN). BoN has started collecting mortgage data from Domestic Systemically Important banks.

---

### Fund Relations, Technical Assistance, and Work Program (Selected Items)

### Fund Relations (as of May 31, 2019)
- Membership Status: Joined September 1990; Article VIII.
- Quota: 191.10 SDR (million) — 100.00 percent of Quota.
- Fund holdings of currency: 191.00 SDR (million) — 99.95 percent of Quota.
- Reserve position in Fund: 0.15 SDR (million) — 0.08 percent of Quota.
- SDR Department: Net cumulative allocation 130.39 SDR (million) — 100.00 percent of Quota; Holdings 2.39 SDR (million) — 1.83 percent of Quota.
- Outstanding Purchases and Loans: None.
- Financial Arrangements: None.
- Projected Obligations to Fund (SDR Million; based on existing use of resources and present holdings of SDRs):
  - Charges/Interest: 2019: 0.72; 2020: 1.42; 2021: 1.42; 2022: 1.42.
  - Total: 2019: 0.72; 2020: 1.42; 2021: 1.42; 2022: 1.42.
- Exchange Rate Arrangements:
  - Namibian dollar pegged to the South African rand.
  - Namibia accepted obligations of Article VIII, Sections 2, 3, and 4 as of September 20, 1996.
  - Bank of Namibia suspended agreement with Bank of Angola on mutual currency conversion in December 2015.

### Technical Assistance, 2014–19 (Selected by Department)
- Fiscal Affairs Department (FAD): Multiple missions from May-14 through April-19 covering Customs Administration, Tax Administration, PFM Act, Cash Management, Budgeting, Macro-Fiscal forecasting, Development of a Fiscal Risk Statement, Strengthen the MTEF, SOEs fiscal risks, among others.
- Monetary and Capital Markets Department (MCM): Missions including Stress Testing (January-14), Basel II (September-14), Financial Stability Framework (February-15), Basel III (April-15), Macroprudential Framework (June-15), Non-bank Regulation and Supervision (April-17), National PFMI (July-18), Cyber risk and cyber security (November-18), Strengthening Bank Stress Testing (December-18).
- Statistical Department (STA): Missions on National Accounts, Monetary Statistics, Price Statistics, Balance of Payments, Government Finance Statistics, Consumer Prices/Producer Price, etc., from February-14 through April-19.

### Joint World Bank and IMF Work Program (as of June 2019)
- World Bank planned activities include regular macroeconomic monitoring (First and third quarters of 2019), Systematic Country Diagnostic (TBD; First semester of 2020), TA on eProcurement (July 2019; expected delivery February 2020), and other TA TBD.
- IMF planned activities include 2019 Article IV consultation (June 2019; expected delivery August 2019), Revenue administration 2019, PFM budget preparation 2019, Macroprudential policy 2020, Monetary policy implementation and operations 2020, Basel III implementation 2020, Financial soundness indicators 2019, National accounts and Producer price index (2019–2020), Government finance statistics 2020.
- Coordination requests:
  - Fund requests to Bank: Periodic updates on progress with domestic structural reform agenda (NDP5, Industrial Policy Strategy, social protection reviews, Financial Sector Strategy, inequality and social programs).
  - Bank’s request to Fund: Periodic updates on macroeconomic/fiscal developments and Fund analytical and TA reports.

### Statistical Issues
- Assessment of Data Adequacy for Surveillance:
  - General: Data provision has shortcomings but is broadly adequate for surveillance. Most important shortcomings: coverage of fiscal accounts, producer price statistics, and some consistency of external sector statistics.
  - National Accounts: Base year is 2010 and a rebasing is planned.

*Annex VIII. Implementation of the 2018 FS — IMF staff compilation.*

### 2019. Quarterly national accounts (QNA) estimates are disseminated on the Namibia Statistics

### 1namea2019001 - 2019. Quarterly national accounts (QNA) estimates are disseminated on the Namibia Statistics

### National Accounts (NA)
- QNA estimates are disseminated on the Namibia Statistics Agency’s (NSA) website, though there is a need to improve its source data and coverage.
- Plans by the NSA to produce QNA estimates in current prices are ongoing.
- The NA are produced bi-annually and revised for the past three years.
- Major revisions for back years such as correction of errors and changes to the economic structure to reflect current economic situations occur at longer intervals.
- Technical assistance (TA) in NA resumed in 2017, continued in 2018 and is expected to continue in 2019.

### Price Statistics and Labor Market Data
- The consumer price index is based on expenditures derived from the 2009/10 Household Income and Expenditure Survey (HIES) and may not be representative of current expenditure patterns.
- Recommendation: The NSA should update the CPI weights and item basket using the results of the 2015/16 HIES.
- Assisted by AFRITAC South, the NSA has compiled a producer price index (PPI) on a pilot basis.
- Labor market data, including labor force, employment, and wages are only collected on a bi-annual basis (the latest annual labor force survey is for 2018).

### Government Finance Statistics (GFS)
- Annual and monthly budgetary central government data by fiscal year are reported on a cash basis in GFSM 2014 format on the eGDDS NSDP.
- High discrepancies are common in the fiscal data of the Budgetary Central Government; further improvements are needed:
  - Data reconciliation of assets and liabilities.
  - Consolidation of the general government fiscal data.
- Recommendation: Monthly or quarterly data should be made available in a timely manner.
- Recommendation: Authorities are recommended to report debt data to the World Bank’s Public Sector Debt Statistics database.
- The Fund has been providing assistance to broaden the coverage of fiscal operations accounts.

### Monetary and Financial Statistics (MFS)
- The Bank of Namibia (BoN) reports monthly monetary statistics based on standardized report forms (SRFs) for the BoN and Other Depository Corporations (banks and money market funds).
- Concepts and definitions are broadly in line with the Monetary and Financial Statistics Manual.
- The BoN has started to report Other Financial Corporations (OFCs) data covering pension funds, insurance companies and the Development Bank since December 2017, and data have been published in the International Financial Statistics.
- Timeliness needs improvement.
- Future work for OFCs should focus on covering asset managers and other remaining OFCs.

### Financial Soundness Indicators (FSIs)
- The BoN reports Financial Soundness Indicators (FSIs) for banks on a quarterly basis for publication on the IMF website.
- FSIs have wide-ranging data quality issues, including aggregation and large unexplained swings.
- There is no diagnostics of whether the issues are rooted in the quality of the source data and/or compilation methods.
- FSIs do not cover nonbank financial institutions or other nonfinancial sectors.

### Balance of Payments (BOP) and International Investment Position (IIP)
- The BoN reports BOP and IIP data on a quarterly basis with a lag of one quarter following BPM6.
- The BoN has enhanced the data collection process and incorporated new data sources such as the financial statements of the FDI companies.
- Further work is needed to:
  - Expand the coverage of ESS (e.g., mineral and oil exploration sector and insurance companies).
  - Ensure consistency across datasets: between the financial statements and FDI data included in the IIP; and between IIP and MFS.
- Namibia participated for the first time in the Coordinated Direct Investment Survey (CDIS) in 2018.
- Authorities plan to conduct a detailed reconciliation exercise to identify the reasons for the discrepancies in imports and exports of goods between balance of payments and NA.

### Data Standards and Quality
- A ROSC (Data Module) for Namibia was published in 2002 and updated in 2005.
- In June 2016 Namibia implemented the recommendations of the Enhanced General Data Dissemination System (e-GDDS) by launching a National Summary Data Page (NSDP), which serves as a one-stop publication vehicle for essential macroeconomic and financial data in both human and machine-readable formats.
- The Namibian authorities have committed to follow the data dissemination schedule as provided in their metadata on the IMF’s Data Dissemination Bulletin Board.
- The authorities are encouraged to make progress through the e-GDDS to higher data standards.

### Reporting to STA
- The MOF regularly reports annual data for publication in the Government Finance Statistics Yearbook. Work for reporting higher frequency data is ongoing.
- The BoN regularly reports MFS, BOP and IIP data for publication in the International Financial Statistics (IFS) and the Balance of Payments Yearbook.

### Table 1 — Selected common indicators (as of January 23, 2018) — selected entries
- Exchange rates: Date of Latest Observation May. 2018; Date Received Jun 2019; Frequency of Data D; Frequency of Reporting D; Frequency of Publication D.
- International reserve assets and liabilities of monetary authorities: Date of Latest Observation April 2019; Date Received April 2019; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
- International investment position: Date of Latest Observation Q4/ 2018; Date Received Mar. 2019; Frequency of Data Q; Frequency of Reporting Q; Frequency of Publication Q.
- Reserve/base money: Date of Latest Observation April 2019; Date Received Jun 2019; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M; Data Quality—Methodological Soundness O, O, LO, LO; Data Quality—Accuracy and Reliability O, LO, O, O, O.
- Consolidated balance sheet of the banking system: Date of Latest Observation Nov. 2017; Date Received Jan. 2018; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
- Consumer price index: Date of Latest Observation May. 2019; Date Received Jun. 2019; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M.
- Revenue, expenditure and balance—central government: Date of Latest Observation Q2/2019; Date Received May. 2019; Frequency of Data B; Frequency of Reporting B; Frequency of Publication B.
- Composition of financing—central government: Date of Latest Observation Q2/2019; Date Received May. 2019; Frequency of Data Q; Frequency of Reporting Q; Frequency of Publication Q.
- Stocks of central government and central government-guaranteed debt: Date of Latest Observation Mar. 2019; Date Received Jun. 2019; Frequency of Data Q; Frequency of Reporting Q; Frequency of Publication Q.
- External current account balance: Date of Latest Observation Q4/ 2018; Date Received Mar. 2019; Frequency of Data Q; Frequency of Reporting Q; Frequency of Publication Q.
- Exports and imports of goods: Date of Latest Observation Q4/ 2018; Date Received Mar. 2019; Frequency of Data Q; Frequency of Reporting Q; Frequency of Publication Q.
- GDP/GNP: Date of Latest Observation Q4/ 2018; Date Received Mar. 2019; Frequency of Data Q; Frequency of Reporting Q; Frequency of Publication Q; Data Quality—Methodological Soundness O, O, O, LO; Data Quality—Accuracy and Reliability LNO, LO, LO, LO, O.
- Gross external debt: Date of Latest Observation Q4/ 2018; Date Received Mar. 2019; Frequency of Data Q; Frequency of Reporting Q; Frequency of Publication Q.

*1namea2019001 - 2019. Quarterly national accounts (QNA) estimates are disseminated on the Namibia Statistics*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1namea2019001.pdf_