## 1namea2021001

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### Executive summary — macroeconomic impact and RFI support
- COVID-19 sharply deteriorated Namibia’s short-term macroeconomic outlook, creating urgent balance of payments (BOP) and fiscal financing needs.
- Real GDP contracted by 7.2 percent in 2020; real GDP growth projected at 2.2 percent in 2021; real output expected to remain below its pre-pandemic level through 2023.
- Staff supports a purchase under the Rapid Financing Instrument (RFI) in the amount of SDR 191.1 million (100 percent of quota).
- Staff supports the purchase to be made in the form of budget support to provide space for interventions to mitigate the socio-economic impact of the pandemic.
- Staff assessment: public debt is sustainable but risks to the debt outlook are significant; capacity to repay the Fund is adequate.

### Real economy, labor, inflation, and outlook
- Real GDP: contracted by 10 percent and 10.5 percent (y-o-y) in Q2 and Q3 2020, respectively; annual change -7.2 percent in 2020; projected 2.2 percent in 2021.
- Employment: close to 9,000 Namibians (1¼ percent of 2018 total employed) lost their jobs between April and September 2020.
- Inflation: headline inflation averaged 2.3 percent (y-o-y) in 2020; consumer prices (average) series includes 2.3 percent for 2020 and 3.6 percent for 2021 in projections.
- Medium-term growth path in staff projections (selected GDP at constant prices, percent change): 2019: -1.6; 2020: -7.2; 2021: 2.2; 2022: 3.6; 2023: 3.1; 2024: 2.5; 2025: 2.5.

### External sector, reserves, and BOP need
- Trade and exports:
  - Trade deficit of 8.7 percent of GDP recorded at end-2020.
  - Diamonds and non-mineral exports contracted by 34 and 30 percent (y-o-y), respectively, at end-2020.
  - Tourism receipts declined by 61 percent (y-o-y) at end-September 2020.
  - Imports fell by 19 percent (y-o-y) at end-2020.
- Reserves and exchange rate:
  - Gross international reserves: US$2.16 billion at end-2020, equivalent to 4.7 months of imports coverage (5.3 months at end-2019).
  - Real effective exchange rate depreciated by -4.3 percent (y-o-y) at end-2020.
- Balance of payments financing need:
  - Staff estimates a BOP financing need of US$527 million (4.7 percent of GDP) in 2021.
  - The RFI purchase expected to close about 52 percent of the anticipated BOP gap in 2021 and to catalyze additional financing from development partners, including AfDB.
  - Text table selected figures: IMF use of Fund resources: 276 (millions of U.S. dollars); AfDB (Budget support): 171 (millions of U.S. dollars); International reserves contribution: 81 (millions of U.S. dollars).

### Fiscal impact, vaccination costs, and financing gap
- Fiscal impact:
  - Overall fiscal deficit widened to 5.5 percent of GDP in the first half of FY20/21.
  - Tax revenues declined by about 16 percent (y-o-y); SACU tax revenues increased by 15 percent (y-o-y).
  - Mining tax revenues decreased by 22 percent (y-o-y); non-mining tax revenues declined by 26 percent (y-o-y).
  - Public spending increased by 17 percent (y-o-y), reflecting the COVID-19 emergency response package.
- Vaccination campaign:
  - Target: cover 60 percent of the population.
  - Overall fiscal cost: US$115 million (1 percent of GDP).
  - Timing and fiscal incidence: FY20/21: 0.4 percent of GDP; FY21/22: 0.5 percent of GDP.
  - Vaccine acquisition total estimated cost: US$37 million (0.3 percent of GDP); to be incurred by end-FY20/21: US$12 million (0.1 percent of GDP) for vaccines under the COVAX scheme covering 20 percent of the population.
  - Deployment costs: US$77 million (0.7 percent of GDP); of this US$51 million (0.4 percent of GDP) anticipated to be incurred in FY2020.
  - Text Table 3 selected line items (USD Millions, percent of GDP):
    - Vaccine acquisition (60 percent coverage): 37.4 — 0.33; contingency: 5.6 — 0.05
    - Supplies (e.g. Syringes, etc.): 0.9 — 0.01
    - Cold chain and other infrastructure: 8.1 — 0.07; cold chain Capex: 4.4 — 0.04; other: 3.4 — 0.03
    - Transportation costs: 3.3 — 0.03
    - Capacity developments and other training: 65.3 — 0.58
    - Communication campaign for demand creation: 0.1 — 0.00
    - Total Cost: 115.1 — 1.0
- FY20/21 financing gap:
  - Overall fiscal deficit expected to widen to 9 percent of GDP in FY20/21.
  - Despite reallocations (0.3 percent of GDP in goods and services; 0.1 percent of GDP in public investment), a fiscal financing gap of 3.7 percent of GDP is expected in FY20/21.
  - Potential financing to cover the gap:
    - RFI purchase would cover 2.3 percent of GDP.
    - AfDB COVID facility: ZAR 2,500 million (1.4 percent of GDP) to be disbursed by end-March 2021 and a similar amount in FY21/22; AfDB finalizing a two-year budget support operation for ZAR 5 billion to be disbursed evenly in FY20/21 and FY21/22.
  - Text Table 4 (selected percent of GDP):
    - Revenues: Pre-Covid 32.7; RFI Baseline 32.4; Difference -0.3
    - Expenditure: Pre-Covid 37.6; RFI Baseline 41.5; Difference 3.9
    - Overall balance: Pre-Covid -4.9; RFI Baseline -9.0; Difference -4.1
    - Fiscal Financing Gap: 3.7
    - Potential financing: IMF RFI: 2.3; AfDB Covid Facility: 1.4; Unidentified support: 0

### Financial sector condition and policy measures
- Banking sector:
  - Entered the crisis liquid and well-capitalized, but risks increased.
  - Non-performing loans ratio increased to 6.4 percent at end-December 2020 (from 4.6 percent at end-2019); quarterly observations include 6.4 (Mar-20), 5.7 (Jun-20), 6.4 (Sep-20).
  - Depository corporations’ lending to the government increased by 29 percent (y-o-y).
  - Government securities to total assets were 11.5 percent at end-September 2020 (11.2 percent at end-2019).
  - Banks’ credit to the private sector increased by 0.9 percent at end-November (y-o-y).
- Monetary policy:
  - Bank of Namibia lowered the policy rate from 6.25 to 3.75 percent since mid-March 2020; staff supports easing while preserving the currency peg.
  - Monetary policy will continue to ensure adequate liquidity to support credit to the economy while sustaining the currency peg.
- Financial sector measures and supervision:
  - Temporary liquidity relief measures, relaxation of capital conservation buffer rate, payment moratoria, loan guarantee schemes, and targeted supervisory actions (strengthened reporting, planned assessment of asset classification, suspension of interest and provisioning for two systemic banks).
  - Staff recommends these measures be temporary and maintaining appropriate loan classification and provisioning.
  - Strengthen supervision of non-bank financial institutions; promulgate and implement pending regulatory bills (NAMFISA bill, Financial Institutions and Markets bill, Financial Services Adjudicator).

### Debt dynamics, stress tests, and vulnerabilities
- Public debt trajectory (selected):
  - Public debt increased to 59.9 percent of GDP in FY19/20; projected to sharply increase to 64.6 percent of GDP in FY20/21.
  - Public debt-to-GDP ratio expected to peak at 70.2 percent in FY22/23 and then gradually decline to 64.3 percent in FY26.
- Key debt risks:
  - Repayment of the 2010 Eurobond in US$ (US$500 million) falling due in FY21/22.
  - SACU tax revenues expected to sharply decline by about 3 percentage points of GDP in FY21/22 and remain subdued in FY22/23.
  - Stronger/protracted COVID-19 impact or delays in consolidation would worsen debt dynamics.
- Stress-test outcomes (selected):
  - Extreme combined macro-fiscal shock would result in debt-to-GDP exceeding 94 percent of GDP in FY23/24 and gross financing needs reaching 33.2 percent of GDP in FY21/22.
  - Contingent liability shock (default of 80 percent on all guaranteed debt, equivalent to 5.4 percent of GDP) combined with contracting real GDP would lead to debt and gross financing needs peaking at 81.6 and 34.7 percent of GDP, respectively, in FY21/22 and FY22/23.
- External debt sensitivity:
  - A non-interest current account deficit widened by 2.5 percent of GDP (1/2 standard deviation shock) would raise external debt to about 89 percent of GDP by 2025.
  - A one-time 30 percent real depreciation in 2021 would increase external debt by about 9 percent of GDP relative to the baseline.
- Baseline external debt-to-GDP (selected): 2020: 81.7; 2021: 73.8; 2022: 72.3; 2023: 69.1; 2024: 66.3; 2025: 63.3.

### Policy recommendations and medium-term strategy
- Fiscal policy:
  - Support temporary widening of the fiscal deficit to address the health crisis, mitigate socio-economic impact, purchase vaccines, and deploy a vaccination campaign.
  - As the crisis subsides, re-orient fiscal policy toward maintaining debt sustainability and implement a growth-supporting medium-term fiscal consolidation underpinned by wage bill and SOEs reforms.
  - Medium-term consolidation measures supported by staff:
    - Freeze nominal wage increases (no inflation adjustment) in FY21/22; allow natural attrition except in priority sectors; implement a targeted early retirement scheme during FY22/23–FY23/24. Expected cumulative fiscal savings: about 2.1 percentage points of GDP over FY21/22–FY23/24.
    - Improve performance and management of SOEs with AfDB support and divest from selected SOEs. Preliminary estimates: SOE reform could lead to fiscal savings of about 0.7 percent of GDP over FY21/22–FY22/23 and privatization receipts of 1.7 percent of GDP in FY21/22.
    - Strengthen tax administration, operationalize Namibia Revenue Agency, improve filing and payment compliance, broaden the tax base, and strengthen profit shifting and base erosion regulation.
- Monetary and exchange rate policy:
  - Maintain adequate liquidity to support credit while sustaining the currency peg.
- Financial sector:
  - Make temporary relief measures time-bound; maintain appropriate loan classification and provisioning; strengthen supervision and resolution frameworks; monitor contingent liabilities from public guarantee schemes.
- Use of buffers and sequencing:
  - Use external buffers to absorb the COVID-19 BOP shock; RFI purchase to be used as budget support to provide fiscal space and catalyze other financing.
- Governance, transparency, and accountability:
  - All COVID-19 spending was budgeted and execution progress presented in the FY20/21 mid-year budget review.
  - Reporting commitments: further progress report in the FY21/22 budget; final report on Ministry of Finance website by September 2021.
  - Publish all awarded COVID-19 related procurement contracts, including names of entities and beneficial owners, by end-June 2021.
  - Conduct and publish a full audit of COVID-19 spending (including ex-post validation) by the Auditor General within 12 months of the end of FY20/21.
  - Finalize Public Financial Management Bill by end-2021; adopt by end-2022.

### Risks, scenarios, and contingency considerations
- Downside risks:
  - Stronger and more prolonged negative impact on external demand and domestic activity could weaken growth in 2021 and beyond.
  - Resumption of sustained lockdowns, delayed vaccine roll-out, or limited vaccine effectiveness against variants could undermine recovery and increase fiscal pressures.
  - Lower-than-anticipated SACU revenues in FY22/23 and over the medium term would worsen fiscal and external positions.
- Upside scenario:
  - Rapid roll-out of vaccines could produce a faster-than-expected rebound in external demand, support tourism recovery, and accelerate domestic economic recovery.
- Contingent liabilities and market access:
  - Active debt management, including pre-financing, recommended to take advantage of favorable international market conditions and mitigate rollover risks (notably the 2010 Eurobond).

*IMF staff report excerpts and Namibian authorities’ inputs (content unit: 1namea2021001).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- The COVID-19 pandemic has sharply deteriorated Namibia’s short-term macroeconomic outlook, creating urgent balance of payments (BOP) and fiscal financing needs.
- After an initial outbreak peaked in August, a second wave hit in late 2020; containment measures have negatively impacted domestic consumption, economic activity, and tax revenue collection.
- The economy is expected to have sharply contracted by 7.2 percent in 2020, and the recovery is set to remain subdued in 2021.
- The authorities are seeking financial assistance under the Rapid Financing Instrument (RFI). Staff supports a purchase under the RFI in the amount of SDR 191.1 million (100 percent of quota).
- Staff supports the purchase to be made in the form of budget support to provide space for interventions to mitigate the socio-economic impact of the pandemic.
- Public debt is sustainable but risks to the debt outlook are significant. Capacity to repay the Fund is adequate.

### Impact of the COVID-19 Pandemic and Short-Term Outlook
- Real economy and employment
  - Real GDP contracted by 10 percent and 10.5 percent (y-o-y) in Q2 and Q3 2020, respectively.
  - Close to 9,000 Namibians (1¼ percent of 2018 total employed) lost their jobs between April and September 2020.
  - Headline inflation averaged 2.3 percent (y-o-y) in 2020; food prices inflation was sustained.
  - Real GDP growth is expected to be negative at -7.2 percent in 2020 and projected at 2.2 percent in 2021; real output is expected to remain below its pre-pandemic level through 2023.
- External sector and reserves
  - Trade deficit of 8.7 percent of GDP was recorded at end-2020.
  - Diamonds and non-mineral exports contracted by 34 and 30 percent (y-o-y), respectively, at end-2020.
  - Tourism receipts declined by 61 percent (y-o-y) at end-September 2020.
  - Imports fell by 19 percent (y-o-y) at end-2020.
  - Gross international reserves stood at US$2.16 billion at end-2020, equivalent to 4.7 months of imports coverage (5.3 months at end-2019).
  - The real effective exchange rate depreciated by -4.3 percent (y-o-y) at end-2020.
- Fiscal impact
  - Overall fiscal deficit widened to 5.5 percent of GDP in the first half of FY20/21.
  - Tax revenues declined by about 16 percent (y-o-y); SACU tax revenues increased by 15 percent (y-o-y).
  - Mining tax revenues decreased by 22 percent (y-o-y); non-mining tax revenues declined by 26 percent (y-o-y).
  - Public spending increased by 17 percent (y-o-y), reflecting the COVID-19 emergency response package.
- Financial sector
  - Banking system entered the crisis liquid and well-capitalized, but risks increased.
  - Non-performing loans ratio increased to 6.4 percent at end-December 2020 (from 4.6 percent at end-2019).
  - Depository corporations’ lending to the government increased by 29 percent (y-o-y).
  - Government securities to total assets were 11.5 percent at end-September 2020 (11.2 percent at end-2019).
  - Banks’ credit to the private sector increased by 0.9 percent at end-November (y-o-y).

### Balance of Payments Need and RFI Contribution
- Staff estimates a BOP financing need of US$527 million (4.7 percent of GDP) in 2021.
- The RFI purchase is expected to close about 52 percent of the anticipated BOP gap in 2021 and to catalyze additional financing from development partners, including AfDB.
- Text Table 1 (selected figures)
  - Current Account (2021 Proj.): -795 to 103 (text table format indicates components; staff estimate of BOP financing gap is -527).
  - IMF use of Fund resources: 276 (millions of U.S. dollars).
  - AfDB (Budget support): 171 (millions of U.S. dollars).
  - International reserves contribution: 81 (millions of U.S. dollars).

### Policy Response and Recommendations
- Fiscal policy
  - Authorities adopted a comprehensive Economic Stimulus and Relief Package estimated at 3.6 percent of GDP.
  - Staff supports a temporary widening of the fiscal deficit to address the health crisis, mitigate socio-economic impact, purchase vaccines, and deploy a vaccination campaign.
  - Key components of the COVID-19 fiscal response (Text Table 2):
    - Health spending: 727 (N$ million), 0.4 percent of FY GDP.
    - Education spending: 600 (N$ million), 0.3 percent of FY GDP.
    - Water provisions and facilities: 80 (N$ million), 0.0 percent of FY GDP.
    - Emergency Income Grant: 772 (N$ million), 0.4 percent of FY GDP.
    - Arrears repayment: 3,800 (N$ million), 2.2 percent of FY GDP.
    - Wage subsidies program: 400 (N$ million), 0.2 percent of FY GDP.
    - Total: 6,379 (N$ million), 3.6 percent of FY GDP.
  - As the crisis subsides, authorities should re-orient fiscal policy toward maintaining debt sustainability and implement a growth-supporting medium-term fiscal consolidation underpinned by wage bill and SOEs reforms.
- Monetary and exchange rate policy
  - Monetary policy will continue to ensure adequate liquidity to support credit to the economy while sustaining the currency peg.
- Financial sector measures
  - While preserving financial stability, temporary financial sector measures will continue supporting private sector activity (including payment moratoria and loan guarantee schemes).
- Use of buffers and sequencing
  - External buffers will be used to absorb the COVID-19 BOP shock.
  - The RFI purchase is recommended as budget support to provide fiscal space for urgent health and social measures and to catalyze other financing.

### Risks and Scenarios
- Downside risks
  - Stronger and more prolonged negative impact on external demand and domestic activity could weaken growth in 2021 and beyond.
  - A resumption of sustained lockdowns, delayed vaccine roll-out, or limited vaccine effectiveness against variants could undermine recovery and increase fiscal pressures.
  - Lower-than-anticipated SACU revenues in FY22/23 and over the medium term would worsen fiscal and external positions.
- Upside scenario
  - A rapid roll-out of vaccines could produce a faster-than-expected rebound in external demand, support tourism recovery, and accelerate domestic economic recovery.

*IMF staff report: “EXECUTIVE SUMMARY” (1namea2021001)*

### 11.      The authorities are taking steps for acquiring COVID-19 vaccines and deploying

### 1namea2021001 - 11.      The authorities are taking steps for acquiring COVID-19 vaccines and deploying

### Vaccination campaign design, coverage, and costs
- Authorities target to cover 60 percent of the population through the COVID-19 vaccination campaign.
- Overall fiscal cost: US$115 million (1 percent of GDP).
- Timing and fiscal incidence:
  - FY20/21: 0.4 percent of GDP.
  - FY21/22: 0.5 percent of GDP.
- Vaccine acquisition:
  - Total estimated cost: US$37 million (0.3 percent of GDP).
  - To be incurred by end-FY20/21: US$12 million (0.1 percent of GDP) for vaccines under the COVAX scheme covering 20 percent of the population.
  - Remainder to be incurred in FY21/22 to immunize additional 40 percent of the population.
  - Note: A first installment of US$1.3 million was paid in December 2020 to acquire the vaccines under the Covax scheme.
- Deployment costs:
  - Fiscal costs expected for deployment: US$77 million (0.7 percent of GDP), including purchase of infrastructure, capacity development and training of medical personnel.
  - Of this US$77 million, US$51 million (0.4 percent of GDP) are anticipated to be incurred in FY2020.

- Text Table 3 (Namibia: Fiscal Costs of the COVID-19 Vaccination Campaign) — selected line items (USD Millions, percent of GDP):
  - Vaccine acquisition (60 percent coverage): 37.4 — 0.33
    - of which contingency: 5.6 — 0.05
  - Supplies (e.g. Syringes, etc.): 0.9 — 0.01
  - Cold chain and other infrastructure: 8.1 — 0.07
    - of which cold chain Capex: 4.4 — 0.04
    - of which other (e.g. for monitoring evalaution, supervision, etc.): 3.4 — 0.03
  - Transportation costs: 3.3 — 0.03
  - Capacity developments and other training: 65.3 — 0.58
  - Communication campaign for demand creation: 0.1 — 0.00
  - Total Cost: 115.1 — 1.0
- Source for table: Namibian authorities and IMF estimates using the WHO framework and Namibia country specific data. The cost in percent of GDP is calculation based on 2021 US$GDP.

### Fiscal impact and financing needs
- Overall fiscal deficit expected to widen to 9 percent of GDP in FY20/21 due to: drop in tax revenues, the COVID-19 response package, purchase of vaccines, and deployment of vaccination campaign.
- Authorities reallocated non-priority spending in October 2020 mid-year budget review:
  - 0.3 percent of GDP in goods and services.
  - 0.1 percent of GDP in public investment.
- Despite reallocations, a fiscal financing gap of 3.7 percent of GDP is expected in FY20/21.
- Potential financing to cover the gap:
  - RFI purchase would cover 2.3 percent of GDP.
  - AfDB COVID facility: ZAR 2,500 million (1.4 percent of GDP) to be disbursed by end-March 2021 and a similar amount in FY21/22; AfDB finalizing a two-year budget support operation for ZAR 5 billion to be disbursed evenly in FY20/21 and FY21/22.
  - Unidentified support: 0
- Text Table 4 (Namibia: Fiscal Financing Gap in FY20/21) — selected figures (Percent of GDP):
  - Revenues: Pre-Covid 32.7; RFI Baseline 32.4; Difference -0.3
    - Taxes: Pre-Covid 30.5; RFI Baseline 30.8; Difference 0.3
    - Non-taxes: Pre-Covid 2.1; RFI Baseline 1.5; Difference -0.6
    - Grants: Pre-Covid 0.1; RFI Baseline 0.2; Difference 0.1
  - Expenditure: Pre-Covid 37.6; RFI Baseline 41.5; Difference 3.9
    - Current primary: Pre-Covid 29.8; RFI Baseline 33.2; Difference 3.3
    - Interest payment: Pre-Covid 4.2; RFI Baseline 4.0; Difference -0.2
    - Capital expenditure: Pre-Covid 3.6; RFI Baseline 4.3; Difference 0.7
  - Overall balance: Pre-Covid -4.9; RFI Baseline -9.0; Difference -4.1
  - Fiscal Financing Gap: 3.7
  - Potential financing:
    - IMF RFI: 2.3
    - AfDB Covid Facility: 1.4
    - Unidentified support: 0
- Note on arrears: Arrears to the private sector were accumulated in the previous year and have recently been verified; repayment of arrears to the private sector (VAT refunds and to government suppliers) for a total of N$3.8 billion (2.1 percent of GDP) was accelerated and almost the full amount has been paid.

### Governance, transparency, and accountability measures
- All COVID-19 spending was budgeted and execution progress presented in the FY20/21 mid-year budget review.
- Reporting commitments:
  - A further progress report will be published in the FY21/22 budget.
  - A final report will be published on the website of the Ministry of Finance by September 2021.
  - All awarded COVID-19 related procurement contracts, including the names of the entities and beneficial owners, will be published online by end June 2021.
  - A full audit of COVID-19 spending (including ex-post validation of goods and services procured) will be conducted and published online by the Auditor General within 12 months of the end of FY20/21.
- Public Financial Management Bill finalization:
  - Finalize by end-2021, to be adopted by end-2022, further strengthening Namibia’s public financial management system.
- Beneficial ownership information is already collected by the Registrar of Companies and Close Corporations in Namibia, as well as banks in the context of their customer due diligence measures.

### Policy support, macroeconomic context, and staff views
- Staff supports temporary widening of the fiscal deficit to respond to the crisis and welcomes authorities’ efforts to create fiscal space for emergency spending.
- Staff supports using part of external buffers to respond to the COVID-19 shock but notes that without additional financing, international reserves would fall to 3.7 months of import coverage, below IMF ARA metrics for market access countries.
- The RFI purchase is expected to:
  - Fill about 52 percent of the balance of payments need.
  - Contain the decline in reserves to 4.2 months of import coverage.
  - Be made in the form of budget support to provide space for needed interventions to respond to the COVID-19 pandemic.
- Medium-term fiscal consolidation strategy (authorities’ commitments supported by staff):
  - Contain the wage bill by:
    - Freezing nominal wage increases (no inflation adjustment) in FY21/22.
    - Allowing natural attrition, except in priority sectors.
    - Implementing a targeted early retirement scheme during FY22/23–FY23/24.
    - Expected cumulative fiscal savings: about 2.1 percentage points of GDP over FY21/22–FY23/24.
  - Improve performance and management of state-owned enterprises (SOEs) with AfDB support and divest from selected SOEs.
    - Preliminary estimates: SOE reform could lead to fiscal savings of about 0.7 percent of GDP over FY21/22–FY22/23 and privatization receipts of 1.7 percent of GDP in FY21/22.
  - Strengthen tax administration, including operationalization of the Namibia Revenue Agency, improve filing and payment compliance, broaden the tax base, and strengthen profit shifting and base erosion regulation.

### Debt dynamics, risks, and financial sector considerations
- Public debt projections and vulnerabilities:
  - Public debt will sharply increase to 64.6 percent of GDP in FY20/21 (from 59.9 percent of GDP in FY19/20).
  - Staff’s debt sustainability analysis assumes a modest recovery in 2021 and implementation of medium-term growth-supporting fiscal consolidation.
  - Public debt-to-GDP ratio expected to peak at 70.2 percent in FY22/23 and then gradually decline.
  - Key fiscal risks: repayment of the 2010 Eurobond in US$ (US$500 million) falling due, and SACU tax revenues expected to sharply decline by about 3 percentage points of GDP in FY21/22 and remain subdued in FY22/23.
  - Authorities plan to repay the 2010 Eurobond through issuance of domestic debt.
  - Risk factors that could worsen debt dynamics: stronger and more protracted COVID-19 impact, lower-than-anticipated SACU revenues over the medium term, or delays in planned consolidation.
  - Active debt management, including pre-financing, recommended to take advantage of favorable international market conditions.
- Financial sector stability measures and risks:
  - Monetary policy: Bank of Namibia lowered policy rate from 6.25 to 3.75 percent since mid-March 2020; staff supports easing and preserving the currency peg.
  - Temporary liquidity relief measures and relaxation of capital conservation buffer rate implemented to support banks’ liquidity and credit provision.
  - Staff recommends these measures be temporary and maintaining appropriate loan classification and provisioning, notably in relation to the debt repayment moratorium.
  - Bank supervision actions: strengthened reporting requirements, planned assessment of asset classification, suspension of interest and provisioning for two systemic banks, finalization of the banking act to strengthen regulatory and resolution frameworks.
  - Fiscal risks may arise from contingent liabilities of public guarantee loan schemes; close monitoring required.
  - Strengthen supervision of non-bank financial institutions and increase stress-testing capacities; promulgate and implement pending regulatory bills (NAMFISA bill, Financial Institutions and Markets bill, Financial Services Adjudicator) to support risk-based supervision.

*Source: IMF staff and Namibian authorities (excerpts from the referenced IMF document).*

### 20.      Namibia’s capacity  to repay  its obligations to the Fund is adequate. Namibia has no

### Namibia’s capacity to repay its obligations to the Fund is adequate.

### Capacity to repay and financing arrangements
- Namibia has no outstanding credit from the Fund.
- The authorities’ capacity to repay the Fund is adequate, in view of the favorable medium-term growth outlook and the authorities’ commitment to sound macroeconomic policies and a sustainable debt (Table 6).
- A more protracted impact of the COVID-19 crisis and delays in the implementation of the planned fiscal consolidation would worsen Namibia’s debt dynamics.
- Financing under the RFI will be used in its entirety to provide budget support; the authorities have committed to signing a Memorandum of Understanding between the Ministry of Economy and Finance and the BoN on their respective roles and responsibilities for servicing financial obligations to the Fund.

### Safeguards and audits
- The authorities are committed to undertake a safeguards assessment before Board approval of any subsequent arrangement to which the safeguards policy applies.
- The authorities will authorize Fund staff to hold discussions with the central bank’s external auditors, and to have access to the central bank’s external audit reports.

### Staff appraisal — macroeconomic outlook and risks
- The COVID-19 pandemic has sharply deteriorated Namibia’s short-term macroeconomic outlook, giving rise to urgent BOP and fiscal financing needs.
- The economy is expected to have sharply contracted in 2020 due to the impact of the pandemic and the recovery is set to remain subdued in 2021.
- Measures to contain the outbreak have negatively impacted economic activity, weighing on tax revenues.
- Worsening global conditions have hindered mining production and exports, tourism receipts and investment inflows.
- The near-term outlook remains uncertain, with risks tilted on the downside.

### Policy response to COVID-19
- The authorities’ policy response has been timely, implementing a comprehensive and well-targeted fiscal package to:
  - contain the local outbreak;
  - protect the most vulnerable from the impact of the crisis; and
  - support the private sector and protect jobs.
- The authorities have adopted a plan for the deployment of the vaccination campaign.
- Staff supports a temporary widening of the fiscal deficit to respond to the health emergency, including the purchase of vaccines and infrastructure for the vaccination campaign, and mitigate its socio-economic impact.
- External buffers will be used to partially absorb the COVID-19 BOP shock.
- Monetary policy will continue maintaining adequate liquidity in the financial sector to support credit to the economy while supporting the currency peg.
- Preserving financial stability, while supporting private sector activity, will be important.

### Public finance governance and transparency measures
- All COVID-19 spending was appropriately budgeted and execution progress published.
- An execution report will be published in the FY21/22 budget, and a final report by September 2021.
- The authorities will publish all awarded procurement contracts for COVID-19 related spending, including the names of the entities and beneficial owners, by end-June 2021.
- A full audit of COVID-19 spending will also be published online by 12 months of the end of FY20/21.
- The Public Financial Management bill will be finalized by end-2021.

### Medium-term fiscal strategy and debt outlook
- Staff supports the authorities’ medium-term fiscal consolidation strategy aimed at preserving fiscal and debt sustainability.
- A carefully designed medium-term fiscal consolidation should:
  - support growth and preserve social spending and adequate provision of essential services;
  - gradually phase-out exceptional COVID-19 spending;
  - contain the wage bill;
  - improve the performance and management of SOEs to increase expenditures efficiency; and
  - strengthen tax administration to support mobilizing additional revenues.
- Namibia’s debt dynamics remains sustainable but risks to the debt outlook are significant.

*Source: IMF staff report excerpt (content unit: 1namea2021001).*

### 26.      Against this backdrop, staff supports the authorities’ request for a purchase under the

### 1namea2021001 - 26.      Against this backdrop, staff supports the authorities’ request for a purchase under the

### Request and IMF Staff Support
- Staff supports the authorities’ request for a purchase under the RFI in the amount of SDR 191.1 million (100 percent of quota).
- Rationale:
  - Urgent balance of payments need triggered by the COVID-19 shock.
  - Authorities’ existing and prospective policies to address this external shock.
  - The purchase is expected to catalyze additional financing from development partners.
  - Given large fiscal financing needs to respond to the COVID-19 emergency, staff supports making the purchase in the form of budget support.

### Key Macroeconomic Projections (Selected indicators, 2015–2026)
- GDP at constant prices (percentage change): 4.3, 0.0, -1.0, 1.1, -1.6, -7.2, 2.2, 3.6, 3.1, 2.5, 2.5, 2.5
- GDP deflator (percentage change): 3.9, 8.0, 9.9, 4.4, 1.8, 3.2, 4.4, 4.6, 4.3, 4.4, 4.4, 4.5
- GDP at market prices (N$ billions): 146, 158, 172, 181, 181, 173, 185, 201, 216, 231, 247, 265
- GDP per capita (US$, constant 2000 exchange rate): 9,232; 9,783; 10,444; 10,814; 10,628; 9,886; 10,254; 10,802; 11,285; 11,739; 12,211; 12,711
- Consumer prices (average): 3.4, 6.7, 6.1, 4.3, 3.7, 2.3, 3.6, 4.4, 4.5, 4.5, 4.5, 4.5

### External Sector and Balance of Payments (Selected, 2015–2026)
- Exports (US$, percentage change): -15.7, -1.3, 17.6, 12.1, -7.6, -19.6, 12.3, 15.3, 6.5, 5.1, 4.3, 3.0
- Imports (US$, percentage change): -5.4, -12.8, -0.4, 3.4, -9.8, -22.3, 22.3, 1.2, 3.8, 3.9, 4.4, 4.5
- Current account balance (Percent of GDP): -13.3, -16.0, -4.2, -3.3, -1.7, 1.0, -7.0, -3.9, -1.3, -0.2, -0.2, -0.7
- Gross official reserves (US$ millions): 1,580; 1,791; 2,216; 2,156; 1,965; 2,160; 1,932; 2,042; 2,173; 2,421; 2,645; 2,810
- Months of imports of goods and services (reserves): 3.0, 3.5, 4.2, 4.5, 5.3, 4.7, 4.2, 4.3, 4.4, 4.7, 4.9, 5.0
- External public debt (including IMF) (Percent of GDP): 18.4, 15.5, 14.6, 17.8, 20.5, 23.7, 21.2, 20.1, 19.3, 18.5, 17.5, 16.5
- Trade balance (US$ millions, selected): Trade balance row shows negatives: -3,172; -2,396; -1,811; -1,544; -1,302; -907; -1,420; -946; -875; -854; -893; -1,002
- Current account (US$ millions): -1,523; -1,719; -543; -450; -210; 103; -795; -468; -161; -28; -29; -99
- Financing Gap (US$ millions) and anticipated exceptional financing (2020 entry):
  - Financing Gap: 527
  - Anticipated exceptional financing: 447
    - IMF RFI: 276
    - AfDB budget support: 171
  - Change in reserves: 81

### Fiscal Operations (Central Government, FY basis, selected lines, 2015/16–2026/27)
- Total revenue and grants (N$ millions): 52,216; 50,849; 58,768; 55,820; 58,525; 57,395; 55,179; 51,397; 54,549; 61,038; 72,180; 77,777; 83,561; 89,833
- Tax revenue (N$ millions): 48,919; 47,575; 54,590; 52,189; 54,816; 54,405; 51,650; 48,409; 50,333; 55,679; 66,382; 71,444; 76,712; 82,417
  - Personal income tax (N$ millions): 10,794; 12,002; 13,267; 13,588; 14,147; 12,319; 12,261; 9,585; 13,599; 15,007; 16,374; 17,539; 18,787; 20,138
  - Corporate income tax (N$ millions): 7,723; 7,708; 7,860; 7,325; 7,257; 7,149; 5,710; 4,802; 7,762; 8,921; 9,724; 10,794; 11,761; 12,833
  - VAT and sales taxes (N$ millions): 12,014; 12,430; 12,604; 12,542; 12,999; 11,486; 10,238; 10,505; 12,907; 14,574; 16,308; 17,456; 18,688; 20,017
  - Taxes on international trade (includes SACU receipts) (N$ millions): 17,355; 14,071; 19,597; 17,375; 18,922; 22,252; 22,252; 22,251; 14,750; 15,605; 22,289; 23,849; 25,541; 27,358
- Expenditure and net lending (N$ millions): 65,259; 66,076; 65,080; 65,939; 68,412; 73,203; 74,299; 74,296; 71,283; 75,794; 80,356; 84,927; 90,507; 95,669
  - Current expenditure (N$ millions): 55,202; 57,670; 60,255; 60,190; 62,491; 65,553; 66,572; 66,808; 64,073; 68,042; 72,106; 76,139; 81,162; 85,735
  - Interest payments and borrowing charges (N$ millions): 2,630; 4,312; 5,430; 6,014; 6,887; 7,025; 7,737; 7,737; 7,308; 8,251; 10,104; 10,978; 11,402; 11,014
  - Subsidies, transfers and guarantees (N$ millions): 17,817; 16,339; 18,798; 17,906; 17,510; 19,952; 20,184; 20,606; 17,822; 18,868; 19,942; 20,140; 21,562; 23,095
  - Capital expenditures (N$ millions): 10,050; 8,396; 4,865; 5,812; 5,909; 7,638; 7,727; 7,488; 7,198; 7,738; 8,236; 8,773; 9,329; 9,917
- Overall balance (N$ millions): -13,043; -15,227; -6,312; -10,119; -9,887; -15,808; -19,120; -22,899; -16,734; -14,755; -8,176; -7,150; -6,946; -5,837
- Primary balance (N$ millions): -10,412; -10,915; -881; -4,105; -3,000; -8,782; -11,382; -15,162; -9,426; -6,504; 1,928; 3,828; 4,456; 5,177
- Financing and anticipated exceptional financing (FY 2020/21 entries):
  - Financing: 13,614; Anticipated Financing: 6,533
  - Anticipated Financing breakdown:
    - IMF RFI: 4,033
    - AfDB COVID Facility: 2,500
  - Residual financing gap: -1

### Fiscal Indicators (Percent of GDP, selected)
- Total revenue and grants: 35.1, 31.5, 33.8, 30.8, 32.6, 32.5, 31.7, 30.0, 28.9, 29.8, 32.9, 33.1, 33.2, 33.3
- Expenditure and net lending: 43.8, 41.0, 37.4, 36.4, 38.2, 41.5, 42.7, 43.4, 37.7, 37.1, 36.6, 36.1, 36.0, 35.5
- Overall balance (percent of GDP): -8.8, -9.4, -3.6, -5.6, -5.5, -9.0, -11.0, -13.4, -8.9, -7.2, -3.7, -3.0, -2.8, -2.2
- Public debt/GDP (percent): 41.3, 44.8, 43.2, 50.4, 59.9, 64.6, 67.9, 70.2, 69.4, 68.1, 66.4, 64.3

### Monetary and Financial Sector Indicators (Selected)
- Domestic credit to the private sector (percentage change): 13.8, 8.6, 5.0, 7.2, 7.1, -0.5, 5.7, 7.3, 7.5, 7.0, 7.0, 7.1
- Base money (percentage change): -5.0, 24.7, 10.3, 5.7, 5.0, 9.7, 5.0, 8.4, 7.5, 7.0, 7.0, 7.0
- Broad money (M2) (percentage change): 10.2, 4.9, 14.1, 6.4, 10.5, 9.7, 6.7, 8.4, 7.5, 7.0, 7.0, 7.0
- Reserve money (N$ millions, end-period): 6,372; 7,945; 8,761; 9,256; 7,081; 7,766; 8,154; 8,840; 9,502; 10,171; 10,887; 11,653
- Net foreign assets (N$ millions, monetary survey): 29,792; 26,502; 31,197; 38,234; 36,710; 40,660; 40,355; 42,886; 45,914; 51,037; 55,213; 58,361
- Credit to the private sector (N$ millions): 78,863; 85,606; 89,902; 96,386; 103,211; 102,739; 108,562; 116,509; 125,244; 134,059; 143,495; 153,698

### Financial Sector Indicators (2010–2020, selected)
- Regulatory capital to risk-weighted assets: 15.3; 14.0; 14.2; 14.4; 14.7; 14.3; 15.1; 15.5; 16.8; 15.3; 15.5; 15.2; 15.1
- 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; 4.6; 5.2; 5.7; 6.4 (Mar-20); 5.7 (Jun-20); 6.4 (Sep-20) — table lists evolving observations through 2020 Q3
- Return on assets (before taxes): 3.2; 3.2; 3.1; 3.1; 3.4; 3.7; 3.5; 3.0; 2.9; 2.8; 2.8; 2.3; 2.0
- Liquid assets to total assets (percent): 10.9; 14.0; 11.8; 11.8; 12.7; 12.1; 11.9; 13.9; 13.6; 13.3; 13.0; 15.0; 13.5

### Policy Implications Highlighted in Text
- The RFI purchase is supported to address urgent balance of payments needs from COVID-19 and to catalyze additional external financing.
- The form of the RFI purchase should be budget support given large fiscal financing needs to respond to the COVID-19 emergency.

*Source: Namibian authorities and Fund staff estimates and projections (1namea2021001).*

### 1. Gross financing requirements-1431205613237218923203

### 1. Gross financing requirements-1431205613237218923203

### Gross financing requirements and components
- Current account balance-1037954691612829100
- Capital account balance-113-108-114-125-127-133-140
- Debt amortization73518126444479771
- Gross reserve accumulation00132157272229171

### Available financing
- Total available financing-143758613237218923203
- Foreign direct investment, net-150103167174184192201
- Portfolio investment-36221-84-86-118-139-136
- Other investment*-74353530150151870138
- Use of reserves11781.000000
- *Includes loans, net acquisition of financial assets, currency and deposits, trade credits and advances.
- Sources: Namibian authorities and Fund staff estimates and projections.

### Exceptional financing
- Exceptional financing044700000
- IMF RFI027600000
- AfDB017100000

### Net financing gap (implicit from components)
- Gross financing requirements versus available financing and exceptional financing items are presented above and reflect short-term financing needs and composition.

*Sources: Namibian authorities and Fund staff estimates and projections.*

### Indicators of Capacity to Repay the IMF (Table 7, 2021–26; As of January 07, 2021; SDR millions, unless otherwise indicated)
- Fund obligations based on existing credits (in millions of SDRs)
  - Principal000000
  - Charges and interest0.10.10.10.10.10.1
- Fund obligations based on existing and prospective credit (in millions of SDRs)
  - Principal0.00.00.071.795.623.9
  - Charges and interest2.52.22.22.11.10.2
- Outstanding credit based on existing and prospective drawings
  - In millions of SDRs191.1191.1191.1119.423.90.0
  - In percent of exports of goods and services7.06.05.73.40.60.0
  - In percent of debt service9.09.910.16.41.00.0
  - In percent of GDP2.52.32.21.30.30.0
  - In percent of Gross International Reserves14.313.612.87.21.30.0
  - In percent of quota100.0100.0100.062.512.50.0
- Outstanding credit based on existing drawings (all zeros)
  - In millions of SDRs000000
  - In percent of exports of goods and services000000
  - In percent of debt service000000
  - In percent of GDP000000
  - In percent of Gross International Reserves000000
  - In percent of quota000000
- Net use of Fund credit (in millions of SDRs)191.10.00.0-71.7-95.6-23.9
  - Disbursements191.10.00.00.00.00.0
  - Repayments0.00.00.071.795.623.9
- Memorandum items:
  - Exports of goods and services (millions of US$)396745854872512053435514
  - External debt service (millions of US$)308228072749272134513606
  - Nominal GDP (millions of US$)112991196512536130831366014273
  - Gross international reserves (millions of US$)193220412173242026442808
  - Quota (millions of SDR)191191191191191191

*Source: IMF staff estimates and projections*

### Key takeaways from Table 7
- Outstanding credit based on existing and prospective drawings is 191.1 million SDR in 2021–2023, declining to 119.4 in 2024, 23.9 in 2025, and 0.0 in 2026.
- Net use of Fund credit shows initial disbursement of 191.1 million SDR in 2021 and planned repayments beginning in 2024 (71.7 million SDR) through 2026.
- Charges and interest are small and constant at 0.1 million SDR annually on existing credits and vary slightly on existing and prospective credit.

### Annex I. Debt Sustainability Analysis — Summary

H3: Overview and macroeconomic context
- The COVID-19 crisis has severely deteriorated Namibia’s short-term macroeconomic outlook, with real output expected to sharply contract in 2020 and the external and fiscal positions to worsen.
- Authorities halted fiscal consolidation to accommodate the COVID-19 policy response; public debt and financing needs are expected to sharply increase in the near term, beyond the MAC DSA benchmarks for emerging markets.
- Authorities adopted in the October 2020 mid-year budget review a medium-term fiscal consolidation framework.

H3: Principal conclusions
- Namibia’ debt dynamics are sustainable, though vulnerabilities have increased due to the COVID-19 shock and risks to the debt outlook are significant.
- Gross financing needs will remain large in the short-term and then gradually decline, assuming:
  - A gradual recovery of the Namibian economy in 2021.
  - Implementation of the planned medium-term growth-supporting fiscal consolidation, underpinned by containing the wage bill and a reform of SOEs.
- Risks that would worsen the outlook:
  - Stronger and more protracted impact of the COVID-19 crisis.
  - Delays in implementation of the planned medium-term fiscal consolidation.
  - Shortfalls in the planned debt swap to repay the 2010 Eurobond due in FY21/22.
- A faster-than-anticipated recovery would improve debt dynamics.

A. Public Debt

Background findings
- Public debt-to-GDP ratio increased from 16 percent of GDP in FY10/11 to 59.9 percent of GDP in FY19/20; the primary deficit averaged about 4.1 percent of GDP.
- By FY15/16, public debt exceeded the authorities’ debt management ceiling (35 percent of GDP).
- Fiscal consolidation in FY16/17–FY19/20 reduced primary spending by about 8 percent of GDP by FY19/20.
- Moody’s downgraded Namibia to Ba3 in December 2020 due to COVID-19 impact.

Financing composition and markets
- During FY16/17–FY19/20, gross financing needs averaged 19.2 percent of GDP (above the 15 percent MAC DSA benchmark).
- 2015: issued a US$750 million ten-year Eurobond; 2015–2016: issued rand-denominated bonds for about R2 million; 2017–20: used an AfDB’s budget support facility.
- Domestic market remains the government’s main source of financing; banks buy short-term debt, non-bank financial institutions focus on long-term fixed rate and inflation-indexed instruments.
- 2018 regulatory change increased minimum required investment in domestic assets for pension funds and institutional investors from 35 to 45 percent of assets.

Amortization and rollover risks
- FY19/20: domestic short-term debt ≈ 44 percent of domestic debt and 29 percent of total debt.
- Non-rand foreign currency debt ≈ 17 percent of total debt in FY19/20.
- Spikes in amortization needs in FY21/22 (2010 Eurobond US$500 million) and FY25/26 (2015 Eurobond US$750 million).
- Authorities plan to repay the 2010 Eurobond through issuance of domestic debt to reduce exchange rate risk.

Outlook and projections
- Public debt expected to sharply increase to 64.6 percent of GDP in FY20/21, reflecting widened fiscal deficit and an anticipated contraction of real output by 7.2 percent.
- Public debt-to-GDP ratio projected to peak at 70.2 percent in FY22/23 and then gradually decline to 64.3 percent in FY26.
- Gross financing needs will gradually decline but remain large over the medium-term.
- Authorities’ policy measures to stabilize debt include containing the wage bill, improving SOE performance and management, and selected divesting.

Stress-test and scenarios
- Extreme combined macro-fiscal shock (shocks to growth and interest rates, temporary lower primary balance) would result in:
  - Debt-to-GDP ratio exceeding 94 percent of GDP in FY23/24.
  - Gross financing needs reaching 33.2 percent of GDP in FY21/22.
- Contingent liability shock (default of 80 percent on all guaranteed debt, equivalent to 5.4 percent of GDP) combined with contracting real GDP would lead to:
  - Debt and gross financing needs peaking at 81.6 and 34.7 percent of GDP, respectively, in FY21/22 and FY22/23.
- Heat map assessment: all shock scenarios for debt level and gross financing needs flash red, reflecting high debt level and financing needs under the baseline.
- Mitigating factors: large domestic institutional investor base, market appetite for long maturities, low share of foreign currency debt, relatively favorable market conditions.

B. External Debt

Historical evolution and composition
- Public external debt-to-GDP ratio more than doubled during 2013–2019, reaching 20.2 percent of GDP at end-2019.
- Private sector external debt also increased, mostly loans to fellow enterprises in the mining sector.
- Most external debt has long and medium-term maturities.
- Namibia’s external public debt is mostly owed to commercial creditors (international investors) and multilateral official creditors.

Selected statistics (2013–2019, percent of GDP)
- Total: 38.8, 44.2, 49.6, 60.9, 66.4, 61.8, 66.8
- Public (without guarantees): 8.3, 8.2, 13.2, 17.5, 16.0, 15.5, 20.2
- Private: 30.5, 36.0, 36.4, 43.5, 50.5, 46.2, 46.6
- By maturity:
  - Short-term: 8.5, 8.2, 5.2, 6.4, 7.8, 7.5, 8.0
  - Long and medium-term: 30.3, 36.0, 44.4, 54.4, 58.6, 54.3, 58.8

Outlook and projections
- External debt expected to increase in 2020, peaking at 81.7 percent of GDP in 2020.
  - Public external debt increasing to 26.2 percent of GDP in 2020.
  - Private external debt increasing to 55.4 percent of GDP in 2020.
- Drivers: large public external borrowing to fill exceptional budgetary needs, sizable financial outflows, sharp real output contraction.
- Starting in 2021, external debt expected to gradually decline, reaching pre-COVID-19 crisis level by 2025, alongside growth recovery and improvement in the current account position.
- Gross external financing needs expected to remain large but gradually decline over the medium-term, averaging 25 percent of GDP.

*Sources: BoN, Namibian authorities, IMF staff estimates and projections.*

*IMF staff estimates and projections.*

### 9.      Sensitivity tests suggest that the external debt is vulnerable to current account shocks.

### 9.      Sensitivity tests suggest that the external debt is vulnerable to current account shocks.

### Key findings from stress tests
- If the non-interest current account deficit widened by 2.5 percent of GDP (1/2 standard deviation shock) during the projection period, external debt would increase to about 89 percent of GDP by 2025.
- The impact of real interest rate shocks is small due to the sizeable share of fixed-rate debt.
- The sensitivity of external debt to exchange rate depreciation is limited: a 30 percent exchange rate depreciation in 2021 would increase external debt by about 9 percent of GDP compared to the baseline.

### Selected stress-test scenario results and bound tests
- Bound tests (percent of GDP):
  - B1. Nominal interest rate at historical average plus one standard deviation: 82.2, 75.0, 73.9, 71.2, 68.8, 66.2, -4.4
  - B2. Real GDP growth at historical average minus one standard deviation: 84.5, 78.4, 78.8, 77.5, 76.7, 75.6, -3.5
  - B3. Non-interest current account at historical average minus one standard deviation: 86.6, 83.4, 86.1, 87.0, 88.2, 88.9, -6.1
  - B4. Combination of B1–B3 using one standard deviation shocks: 87.2, 84.1, 87.1, 88.5, 90.2, 91.5, -4.2
  - B5. One-time 30 percent real depreciation in 2018: 81.7, 81.2, 80.9, 77.7, 74.9, 71.8, -5.9
- Selected scenario averages shown in figures:
  - Baseline average external debt (example box figure): 63 (percent of GDP)
  - Non-interest current account shock average: 89 (percent of GDP)
  - Combined shock average: 92 (percent of GDP)
  - Real depreciation (30 percent) scenario average: 72 (percent of GDP)
- Gross external financing need (in billions of US dollars and percent of GDP, Table A1):
  - 2015: USD 3.7 billion; 32.4 percent of GDP
  - 2016: USD 3.6 billion; 34.0 percent of GDP
  - 2017: USD 3.1 billion; 23.8 percent of GDP
  - 2018: USD 3.2 billion; 23.6 percent of GDP
  - 2019: USD 2.8 billion; 22.7 percent of GDP
  - 2020: USD 2.6 billion; 10-Year (table formatting)  ?  (table lists "10-Year" header in place of a percent)
  - 2021: USD 3.9 billion; 13.1 percent of GDP (as shown in table under later years)
  - 2022: USD 3.3 billion; 12.5 percent of GDP
  - 2023: USD 2.9 billion; 13.1 percent of GDP
  - 2025: USD 3.5 billion; 25.9 percent of GDP
  (Note: values taken exactly as they appear in the table entries.)

### Baseline external debt trajectory and key DSA indicators (Table A1 and Figure A3)
- Baseline external debt (external debt-to-GDP, in percent):
  - 2015: 49.6
  - 2016: 60.9
  - 2017: 66.4
  - 2018: 61.8
  - 2019: 66.8
  - 2020: 81.7
  - 2021: 73.8
  - 2022: 72.3
  - 2023: 69.1
  - 2024: 66.3
  - 2025: 63.3
- Debt-stabilizing non-interest current account: 0.2 (percent of GDP)
- Change in external debt (percent of GDP): 2015: 5.4; 2016: 11.3; 2017: 5.5; 2018: -4.7; 2019: 5.0; 2020: 14.8; 2021: -7.8; 2022: -1.6; 2023: -3.2; 2024: -2.8; 2025: -3.0
- Identified external debt-creating flows (percent of GDP): 2015: 10.2; 2016: 16.0; 2017: -8.7; 2018: -1.3; 2019: 4.3; 2020: 6.2; 2021: 4.5; 2022: 0.1; 2023: -2.2; 2024: -2.8; 2025: -2.7
- Current account deficit, excluding interest payments (percent of GDP): 2015: -12.9; 2016: -15.3; 2017: -3.3; 2018: -1.6; 2019: 0.1; 2020: -6.6; 2021: 4.9; 2022: 1.7; 2023: -6.6; 2024: -3.4; 2025: -0.8
- Exports (percent of GDP): 2015: 36.0; 2016: 34.7; 2017: 34.8; 2018: 36.3; 2019: 36.3; 2020: 32.8; 2021: 35.1; 2022: 38.3; 2023: 38.9; 2024: 39.1; 2025: 39.1
- Imports (percent of GDP): 2015: -61.6; 2016: -58.3; 2017: -47.7; 2018: -46.2; 2019: -46.0; 2020: -42.3; 2021: -48.4; 2022: -46.3; 2023: -45.8; 2024: -45.6; 2025: -45.6
- External debt-to-exports ratio (in percent): 2015: 137.6; 2016: 175.6; 2017: 191.0; 2018: 170.3; 2019: 183.9; 2020: 249.0; 2021: 210.3; 2022: 188.6; 2023: 177.7; 2024: 169.3; 2025: 161.8

### DSA baseline public debt dynamics (selected figures from public DSA)
- Nominal gross public debt (percent of GDP):
  - 2018: 29.2
  - 2019: 50.4
  - 2020: 59.9
  - 2021: 64.6
  - 2022: 67.9
  - 2023: 70.2
  - 2024: 69.4
  - 2025: 68.1
  - 2025 (alternate listing): 66.4
- Public gross financing needs (percent of GDP): 2018: 8.4; 2019: 17.7; 2020: 18.5; 2021: 25.6; 2022: 28.2; 2023: 23.6; 2024: 19.1; 2025: 19.1; 2025 (alternate): 24.1
- Real GDP growth (in percent): 2018: 3.5; 2019: 1.1; 2020: -1.6; 2021: -7.2; 2022: 2.2; 2023: 3.6; 2024: 3.1; 2025: 2.5; later years: 2.5
- Inflation (GDP deflator, in percent): 2018: 6.7; 2019: 3.0; 2020: 0.7; 2021: 6.1; 2022: 4.8; 2023: 4.4; 2024: 4.2; 2025: 4.4; 2025 (alternate): 4.4
- Effective interest rate (in percent): 2018: 7.5; 2019: 8.0; 2020: 7.5; 2021: 6.5; 2022: 6.7; 2023: 6.6; 2024: 7.3; 2025: 7.4; later: 7.4
- Cumulative change in gross public sector debt (2018–2025): 2.7, 7.2, 9.5, 4.6, 3.3, 2.3, -0.8, -1.3, -1.6, 6.5 (as shown in table)

### Alternative scenarios (composition and impact)
- Composition of public debt by currency and maturity is presented in the DSA figures (baseline, historical, constant primary balance scenarios).
- Alternative scenarios shown include: Baseline, Historical Scenario, Constant Primary Balance Scenario.
- Representative underlying assumptions for Baseline scenario (selected):
  - Real GDP growth (percent): -7.2 (2020), 2.2 (2021), 3.6 (2022), 3.1 (2023), 2.5 (2024), 2.5 (2025)
  - Inflation: 6.1, 4.8, 4.4, 4.2, 4.4, 4.4 (2020–2025)
  - Primary Balance (percent of GDP): -5.0, -5.0, -3.2, 0.9, 1.6, 1.8 (2020–2025)
  - Effective interest rate (percent): 6.5, 6.5, 6.6, 7.3, 7.4, 7.4 (2020–2025)

### Implications
- External debt dynamics are particularly sensitive to current account shocks; a sustained widening of the non-interest current account deficit could push external debt well above baseline projections (example: to about 89 percent of GDP by 2025 for a 2.5 percent of GDP shock).
- Exchange rate risk, while limited in the baseline given debt composition, can still materially increase external debt levels (example: a 30 percent real depreciation in 2021 would raise external debt by about 9 percent of GDP).
- Real interest rate shocks have limited impact owing to the sizeable share of fixed-rate debt.

*Source: IMF staff.*

### 2.      The COVID-19 pandemic has sharply weakened Namibia’s short-term  macroeconomic

### The COVID-19 pandemic has sharply weakened Namibia’s short-term macroeconomic outlook and led to urgent balance of payments needs

### Macroeconomic impact and external financing need
- Real GDP contracted by 7.2 percent in 2020.
- Economic recovery expected to be subdued in 2021 as the local outbreak continues.
- External position expected to worsen in 2021 due to:
  - continued impact of the COVID-19 shock,
  - emergency imports for COVID-19 vaccines and deployment infrastructure,
  - sharp decline in SACU revenues,
  - repayment of an Eurobond falling due in 2021.
- Urgent balance of payments financing need of US$527 million (4.7 percent of GDP) in 2021.
- Authorities request emergency IMF support under the Rapid Financing Instrument (RFI) of SDR 191.1 million (100 percent of quota) in the form of budget support.
- The RFI purchase is expected to cover about 52 percent of the anticipated balance of payments gap in 2021 and help catalyze financing from the African Development Bank (AfDB).

### Fiscal impact, emergency response, and transparency commitments
- Overall fiscal deficit expected to widen to 9.0 percent of GDP in FY20/21, creating a fiscal financing gap of 3.8 percent of GDP.
- IMF staff notes the fiscal deficit is estimated to have deteriorated to -9.7 percent of GDP (staff assessment).
- Economic Stimulus and Relief Package total budgetary cost estimated at 3.6 percent of GDP.
- Key components of support measures (with stated fiscal weights where given):
  - Emergency health and education spending: 0.7 percent of GDP.
  - Emergency Income Grant (targeted cash transfer): 0.4 percent of GDP.
  - Wage subsidy program for affected firms to protect jobs.
  - Acceleration of clearing government arrears to the private sector.
  - Temporary postponement of tax payments.
  - Public guarantee loan schemes for firms and individuals.
- Vaccine procurement and roll-out prioritized for 2021:
  - First batch of vaccines received on March 19, 2021; National Deployment and Vaccination Plan launched thereafter.
  - Target: vaccinate 60 percent of the population.
  - Anticipated fiscal cost of vaccination campaign: about US$115 million (1 percent of GDP).
- Transparency, monitoring, and audit commitments:
  - All COVID-19 spending budgeted; progress report presented as of end-October 2020 in FY20/21 mid-year budget review.
  - Further progress report to be published in the FY21/22 budget; final execution report of COVID-19-related spending to be published on the Ministry of Finance website by the beginning of September 2021.
  - All awarded COVID-19 related procurement contracts (including names of awarded entities and beneficial owners) to be published online in accordance with Namibia’s Financial Intelligence Act of 2012.
  - Auditor General to conduct an independent audit of COVID-19 spending, including ex-post validation of goods and services procured, as part of annual auditing within 12 months of the end of FY20/21.
  - Finalize draft Public Financial Management bill by end-2021 and adopt it by end-2022.

### Monetary policy and financial sector measures
- Bank of Namibia (BoN) lowered the policy rate from 6.25 to 3.75 percent.
- BoN measures to support liquidity and credit provision:
  - Temporarily eased regulatory requirements for banks.
  - Loan repayment holidays and liquidity relief measures for individuals, SMEs, and corporations.
- Monetary policy objective: maintain liquidity in the financial sector while preserving the currency peg to the South African rand.
- Inflation averaged 2.2 percent in 2020.
- International reserves stood at N$31.8 billion at the end of 2020, covering about 5 months of imports.
- BoN is finalizing a new banking act to enhance regulatory and resolution frameworks and strengthening supervision of non-bank financial institutions (including stress-testing and portfolio quality monitoring).
- Authorities advancing regulatory bills for the non-bank financial sector: NAMFISA bill, Financial Institutions and Markets bill, and Financial Services Adjudicator.

### Medium-term fiscal consolidation and structural reforms
- Authorities commit to a growth-supporting medium-term fiscal consolidation to preserve debt sustainability as the COVID-19 impact subsides.
- Adopted a medium-term fiscal consolidation framework in the FY20/21 mid-year budget review.
- Planned fiscal measures include:
  - Containing the wage bill through a wage freeze in FY21/22, allowing for natural attrition except in priority social sectors.
  - Implementing a targeted and phased early retirement scheme.
  - Improving performance and management of state-owned enterprises (SOEs) and conducting selected divestments.
  - Strengthening tax administration, including operationalization of the Namibia Revenue Agency (NamRA) and broadening the tax base.
- Specific timelines and actions:
  - Launch NamRA on April 7, 2021.
  - Divestment and SOE governance improvements supported with AfDB assistance; Cabinet approved liquidation of the state-owned airline in February 2021.
  - New tax policies announced to take effect in FY2022/23 to broaden the tax base and improve compliance.
  - Finalization of Public Procurement Amendment Bill and Public Finance Management Layman’s Bill expected by end of the 2021/22 financial year.
- Structural priorities under Harambee Prosperity Plan II (HPPII) and Presidential Economic Recovery Plan:
  - Sustain public investment in social sectors.
  - Boost private sector investment in agriculture, agro-processing, energy, tourism, and the green and blue economies.
  - Scale-up funding for SMEs and youth entrepreneurs.
  - Table reviewed Namibia Investment Promotion Bill and National Equitable Economic Empowerment Bill during the current fiscal year.

### IMF safeguards, engagement, and next steps
- Authorities commit to a safeguards assessment by the IMF and will authorize Fund staff to hold discussions with the central bank’s external auditors and access BoN external audit reports.
- For RFI budget support, authorities will sign a Memorandum of Understanding between the Ministry of Finance and the BoN on respective responsibilities for servicing financial obligations under the RFI.
- Authorities do not intend to introduce or intensify exchange and trade restrictions, multiple currency practices, or other measures that would exacerbate balance of payments difficulties.
- Authorities will continue engagement with the IMF for policy advice, technical assistance, and, if needed, further financial support; they will work with IMF staff to calibrate post-pandemic policies to preserve macroeconomic stability and promote growth.

*Source: Letter from the Minister of Finance and the Governor of the Central Bank of Namibia; authorities’ statement and IMF staff report, March 31, 2021.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1namea2021001.pdf_