## 1namea2025001-print-pdf ## Source details **Canonical URL:** [1namea2025001-print-pdf](https://www.imf.org/-/media/files/publications/cr/2025/english/1namea2025001-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1namea2025001-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1namea2025001-print-pdf.pdf.json) --- ### Recent developments and key indicators - Current account (CA) deficit: 15.3 percent of GDP in both 2023 and 2024. - Oil and gas exploration-related imports: about 9.1 percent of GDP in 2024. - CA deficit excluding exploration-related imports: 6.2 percent of GDP in 2024 (slightly wider than 5.4 of GDP in 2023). - Gross foreign reserves: coverage of 4.4 months of imports in 2024, or 119.6 percent of the Assessing Reserve Adequacy (ARA) metric. - Reserve dynamics: exploration-related FDI inflows more than offset the large CA deficit and contributed to the accumulation of foreign reserves. - Real GDP growth: 3.7 percent in 2024 (decelerated from 5.4 percent in 2022). - Agriculture: contracted sharply due to the 2023–24 drought; drought may have caused approximately 1.3 million people (41 percent of the population) to face high levels of acute food insecurity. - Inflation: YoY headline inflation declined to 3.6 percent in April 2025 (from a recent peak of 6.0 percent in October 2023); core CPI inflation was 4.0 percent (YoY) in April 2025. - Fiscal outcomes FY24/25: - Revenues increased by 1.4 percent of GDP (including a one-off settlement of past tax liabilities of SOEs of 0.5 percent of GDP). - Estimated primary surplus of 1.2 percent of GDP. - Gross public debt-to-GDP ratio broadly unchanged at 66.3 percent. - Eurobond: Namibia’s $750 million (5.2 percent of GDP) Eurobond matures in October 2025; part of SACU revenue transfers placed in a sinking fund to pre-finance redemption. - Monetary policy: Bank of Namibia (BoN) lowered policy rate by 100 basis points since mid-2024; policy rate maintained at 6.75 percent at April 2025 MPC meeting (gap with SARB at 75 bps). - Banking sector: NPLs moderated to 5.6 percent; ROA and ROE improved; Liquid Assets to Total Assets Ratio (LAR) rose; Capital Adequacy Ratio (CAR) remained adequate. - Labor market (NSA 2023 data): - Strict unemployment rate: 36.9 percent in 2023 (rise of 17.1 percentage points); youth strict unemployment: 44.4 percent. - Broad unemployment: 54.8 percent in 2023 (rise of 21.4 percentage points); youth broad unemployment: 61.4 percent. ### Outlook and risks - Growth projections: - 3¾ percent in 2025 and 2026. - About 3 percent in the medium term. - End of drought will boost growth in 2025, but global trade policy uncertainty and weak diamond market will dampen momentum. - External sector projections: - CA deficit projected at 15.5 percent of GDP in 2025. - Medium-term CA range projected at 11–13 percent of GDP as oil exploration continues. - Official reserves projected to fall from 119.6 percent of the ARA threshold in 2024 to 88.6 percent of the threshold in 2025 (as Namibia does not plan to issue a successor to its maturing $750 million Eurobond). - Inflation outlook: annual average headline CPI inflation projected to ease to 4.1 percent in 2025 and remain near 4.5 percent in the medium term. - Key downside risks (tilted to the downside): - Further global trade policy shocks (notably announced U.S. tariffs affecting the diamond market). - Geopolitical fragmentation. - Weather shocks and increased weather volatility. - Weak diamond market. - Rolling back of recent fiscal consolidation and state-owned enterprise reforms. - Upside risks: - Moderation in global trade policy tensions. - Faster development of oil, gas, and green hydrogen projects. - Additional external vulnerability notes: - Oil-exploration-related FDI central to reserve accumulation but does not fully explain elevated CA deficits. - Namibia relatively less exposed to global financing conditions than many emerging markets but could be affected by reduced oil-exploration related FDI inflows. ### Policy recommendations and priorities - Fiscal policy: - Exercise restraint over the public sector wage bill. - Calibrate increase in capital spending to ensure a sustained primary surplus in FY25/26 and FY26/27. - Advance civil service reform to reduce the public wage bill and create room for growth-enhancing spending, including public investment. - Implement PIMA/C-PIMA recommendations to improve efficiency of public investment. - Monetary and financial sector policy: - To safeguard the peg, gradually align the policy rate with that of the SARB (take advantage of SARB rate cuts to reduce the rate gap). - Modernize the liquidity management framework to strengthen monetary policy transmission. - Continue efforts to ensure exit from the Financial Action Task Force (FATF) Grey List. - Natural resource management: - Develop a framework to manage potentially large oil wealth and wind and solar power resources. - Balance local beneficiation for job creation with maintaining an attractive investment climate. - Structural policies: - Foster private sector-led growth to reduce unemployment and inequality by reducing skill mismatches, decreasing red tape, optimizing regulations, and promoting digitalization. ### Fiscal stance, debt dynamics, and public finances - Recent fiscal trajectory: - Primary balance moved into surpluses in FY23/24 and FY24/25. - Gross public debt-to-GDP ratio peaked at 67.5 percent in FY22/23, estimated to drop by 1½ percent of GDP in FY23/24 and remain broadly unchanged in FY24/25. - FY25/26 fiscal stance and MTEF: - FY25/26 budget and March 2025 MTEF project primary surpluses (including privatization receipts) in FY25/26–FY27/28. - FY25/26 budget implies a structural tightening of 1.7 percent of GDP (change in primary balance excluding SACU revenues). - A 3½ percent of GDP drop in SACU revenues causes the primary balance to drop by 1.7 percent of GDP to -0.4 percent of GDP. - One-off privatization receipts (0.8 percent of GDP) will help finance the deficit. - Staff medium-term recommendation: - Staff recommend increasing consolidation by 0.5 percent of GDP in FY26/27 to target public debt of 61 percent of GDP by end-FY27/28. - Public debt management and financing needs: - Gross financing need (GFN) projected to be 25–28 percent of GDP in FY25/26–FY26/27 and below 21 percent thereafter. - Overall risk of sovereign debt distress assessed as moderate. - $750 million (5.2 percent of GDP) Eurobond repayment in October 2025 will significantly reduce foreign-currency debt stock. - Large domestic investor base provides stable funding; foreign debt from development institutions could provide long-term financing. - Example: NamPower contracted a World Bank loan (USD 138.5 million) in 2024, guaranteed by the Namibian government. - FY25/26 fiscal numbers (Percent of GDP, projections): - Total revenue and grants: 36.5 (24/25 Est.), 33.2 (25/26), 32.8 (26/27), 33.1 (27/28). - SACU revenues: 11.2, 7.7, 7.9, 8.2. - Total expenditure: 40.4, 38.8, 37.7, 36.8. - Personnel: 14.1, 13.5, 12.8, 12.3. - Interest payment: 5.2, 5.2, 5.1, 5.1. - Capital expenditure: 3.9, 4.0, 3.9, 3.5. - Primary balance: 1.2, -0.5, 0.2, 1.4. - Primary balance plus privatization receipts: 1.2, 0.3, 0.2, 1.4. - Primary balance excluding SACU revenues: -10.0, -8.2, -7.7, -6.9. - Overall balance: -3.9, -5.7, -4.8, -3.7. - Public debt: 66.2, 62.3, 62.2, 62.0. - Fiscal adjustment composition in FY25/26 (Percent of GDP): - Expiration of drought assistance (savings): 0.6. - Elimination of other one-offs (savings): 0.3. - Savings from wage moderation: 0.5. - Other: 0.4. - Total adjustment: 1.7. - Strengthening fiscal institutions: - Draft amendment to the State Finance Bill to improve public financial management. - Implement key PIMA/C-PIMA recommendations. - Planned creation of a procurement court. - Scaling up adaptation spending: - Namibia among the most arid countries in Africa; fiscal cost of drought relief over FY23/24–FY24/25 estimated at about 1 percent of GDP. - Namibia’s Nationally Determined Contribution, Second Update (2023) estimates priority measures will cost $6 billion through 2030 (of which $3.5 billion is for water resources and $1.5 billion for agriculture and food security), amounting to 48.5 percent of 2023 GDP. ### Monetary policy, the peg, and financial sector stability - Exchange rate peg: - Peg to the rand provided a nominal anchor; Namibia's inflation has closely tracked inflation in South Africa. - BoN policy rate is the 7-day repo rate, currently 6.75 percent (April 2025). - BoN lowered policy rate by 100 basis points since mid-2024; policy rate maintained at 6.75 percent (gap with SARB at 75 bps). - Staff recommendation: align the BoN policy rate with SARB in the near term to safeguard the peg and reserves. - Interest rate and liquidity instruments: - BoN sets prime rate by adding a premium of 375 basis points above the policy rate; resulting prime rate currently 10.5 percent. - BoN call rate currently 7.25 percent (50 basis points above the BoN repo rate). - BoN issues 7, 14, and 28-day bills weekly; BoN bill pricing linked to SARB rates (CPDs). - Financial soundness indicators (selected, 2024 unless stated): - Nonperforming loans to total gross loans (2024): 5.6 percent. - Regulatory capital to risk-weighted assets (2024): 17.3 percent. - Return on assets (2024): 3.4 percent. - Liquid assets to total assets (2024): 16.7 percent. - Customer deposits to total (non-interbank) loans (2024): 109.5 percent. - Foreign currency liabilities to total liabilities (2024): 7.5 percent. - Macro-financial risks and recommendations: - Banking system broadly stable; credit growth subdued; households burdened by debt service. - Half of bank credit goes to mortgages; suggested loan-to-value regulations to reduce future NPLs. - Sovereign-bank nexus is a potential macroprudential risk; consider systemic risk buffer for sovereign exposures that exceed a threshold. - Implement CCyB as a macroprudential tool; strengthen cross-border supervisory cooperation. - Financial integrity: - Progress since FATF “grey list” in February 2024; key gaps remain (beneficial ownership filings, real-time access, investigative capacity). - Authorities should continue efforts to expedite exit from FATF “grey list”. - Payments and digitalization: - BoN Strategic Plan 2025–27 prioritizes digital tools and financial inclusion. - Instant Payment Project aiming to launch by "late 2025 or early 2026". - Participation in Project Sunbird (cross-border payments initiative under the CMA). ### Structural reform agenda, natural resources, and climate resilience - Natural resource management: - Need for rigorous monitoring framework for oil revenue projection and tracking. - Initial phase priority: reduce gross debt and avoid premature asset accumulation; increase development spending as debt decreases and implementation capacity allows. - Welwitschia Fund (WF): Draft WF Act planned for parliamentary submission this year; WF dual objectives: saving for future generations and serving as fiscal and official reserves buffer. - Annex VII (2022 Article IV Staff Report): WF operational as a savings fund with resources of N$460 billion (0.2 percent of GDP) reported in March 2025. - Structural reforms to spur private sector-led growth and job creation: - Address public-sector wage premium and SOE dominance. - Reduce skill mismatches, expand TVET and align training with labor market needs. - Improve access to land, finance, and affordable housing; strengthen infrastructure. - Finalize revisions to the Investment Promotion Act and streamline regulations. - Promote non-resource-intensive sectors (tourism, agriculture). - Climate, drought, and adaptation: - Drought impacts: - Cereal production fell by 53 percent; 68-percent drop in commercial farming. - 40 percent of Namibians faced acute food insecurity. - 84 percent of food reserves depleted as of September 2024. - Dam levels down by 70 percent; Ruacana hydropower output curtailed (over 50 percent of generation capacity). - Government response: - Allocated 0.6 percent of GDP in FY24/25 to disaster relief fund (in addition to 0.3 percent of GDP in previous fiscal year). - Drought relief program provides food items, food vouchers, agricultural supplies, livestock support, improved water access. - UN (including WFP) and several countries supplemented the response. - Climate adaptation needs: public investment in water infrastructure, R&D for agriculture, expanded social assistance and crop insurance. - Social protection and labor market: - Only "about a third of vulnerable persons covered by social assistance as of 2022"; expand coverage to address recurrent weather shocks and elevated unemployment. - Implement active labor market policies and occupational skills audit. ### Risk Assessment Matrix (selected entries and sensitivities) - Conjunctural risks include: - Trade policy and investment shocks: Likelihood: High; Expected Impact: High. - Tighter financial conditions and systemic instability: Likelihood: Medium; Expected Impact: Medium. - Regional conflicts: Likelihood: Medium; Expected Impact: High. - Commodity price volatility: Likelihood: Medium; Expected Impact: High. - Structural risks include: - Deepening geoeconomic fragmentation: Likelihood: High; Expected Impact: High. - Climate change: Likelihood: Medium; Expected Impact: High. - Social discontent: Likelihood: Medium; Expected Impact: High. - Domestic risks include: - Development of the oil sector failing to benefit the local economy: Likelihood: Medium; Expected Impact: Medium. - Diamonds: structural weak demand and competition from lab-grown diamonds: Likelihood: Medium; Expected Impact: Medium. - Lower than anticipated SACU revenues: Likelihood: Medium; Expected Impact: Medium. - Sensitivity and shock estimates: - If U.S. baseline tariff rate of 10 percent applies globally: Namibia's export revenue drop by 0.1 percent and GDP growth lower by around 0.1 percentage point in 2025 (compared with a counterfactual of no U.S. tariff adjustment). - A 10 percent negative price shock to diamonds leads to a 1.6 percent decline in export revenues (0.5 percent of GDP). - A 10 percent negative price shock to diamond, uranium, and gold leads to a 5.6 percent drop in export revenues (1.9 percent of GDP) in 2025. ### Selected balance of payments, monetary, and fiscal statistics (2022–30 highlights as presented) - Real GDP growth (percent): 2022: 5.4; 2023: 4.4; 2024 (Est.): 3.7; 2025–2030 (Proj.): 3.8, 3.7, 2.9, 3.0, 3.0, 3.0. - CPI Inflation, average: 2022: 6.1; 2023: 5.9; 2024 (Est.): 4.2; 2025–2030 (Proj.): 4.1, 4.5, 4.5, 4.5, 4.5, 4.5. - Current account balance (percent of GDP): 2022: -12.6; 2023: -15.3; 2024 (Est.): -15.3; 2025 (Proj.): -15.5; 2030 (Proj.): -11.3. - Gross official reserves (percent of GDP): 2022: 22.3; 2023: 23.2; 2024 (Est.): 25.1; 2025 (Proj.): 18.4; 2030 (Proj.): 22.2. - Public debt, gross (percent of GDP): 2022: 67.5; 2023: 66.0; 2024 (Est.): 66.2; 2025–2030 (Proj.): 62.3, 62.2, 61.2, 60.1, 60.1, 59.3. - Per-capita GDP (2024, USD): 4,471.8. - Balance of payments (millions USD): Current account balance: 2022: -1,588; 2023: -1,892; 2024 (Est.): -2,052; 2025 (Proj.): -2,204; 2030 (Proj.): -2,075. - Foreign direct investment, net (millions USD): 2022: -1,059; 2023: -2,612; 2024 (Est.): -2,022; 2025 (Proj.): -2,177; 2030 (Proj.): -2,612. - Gross international reserves (millions USD): 2022: 2,799; 2023: 2,873; 2024 (Est.): 3,362; 2025 (Proj.): 2,629; 2030 (Proj.): 4,085. - Reserves in months of imports: 2022: 4.0; 2023: 3.8; 2024 (Est.): 4.4; 2025 (Proj.): 3.4; 2030 (Proj.): 4.5. *Source: IMF staff report on Namibia (May 28, 2025).* ### 15.3 percent of GDP in 2023 and 2024, while oil-exploration-related FDI has contributed ### NAMIBIA ### Recent developments and key indicators - Current account (CA) deficit: 15.3 percent of GDP in both 2023 and 2024. - Oil and gas exploration-related imports: about 9.1 percent of GDP in 2024. - Excluding exploration-related imports, CA deficit would be 6.2 percent of GDP in 2024 (slightly wider than 5.4 of GDP in 2023). - Gross foreign reserves: coverage of 4.4 months of imports in 2024, or 119.6 percent of the Assessing Reserve Adequacy (ARA) metric. - Reserve dynamics: exploration-related FDI inflows more than offset the large CA deficit and contributed to the accumulation of foreign reserves. - Real GDP: growth decelerated to 3.7 percent in 2024 from 5.4 percent in 2022. - Agriculture: contracted sharply due to the 2023–24 drought; the drought may have caused approximately 1.3 million people (41 percent of the population) to face high levels of acute food insecurity. - Inflation: YoY headline inflation declined to 3.6 percent in April 2025 (from a recent peak of 6.0 percent in October 2023); core CPI inflation was 4.0 percent (YoY) in April 2025. - Fiscal: revenues increased by 1.4 percent of GDP in FY24/25 (including a one-off settlement of past tax liabilities of SOEs of 0.5 percent of GDP); estimated primary surplus of 1.2 percent of GDP; gross public debt-to-GDP ratio broadly unchanged at 66.3 percent. - Eurobond: Namibia’s $750 million (5.2 percent of GDP) Eurobond matures in October 2025; part of SACU revenue transfers has been placed in a sinking fund to pre-finance redemption. - Monetary policy: Bank of Namibia (BoN) lowered policy rate by 100 basis points since mid-2024; policy rate maintained at 6.75 percent at April 2025 MPC meeting (gap with SARB at 75 bps). - Banking sector: NPLs moderated to 5.6 percent; ROA and ROE improved; Liquid Assets to Total Assets Ratio (LAR) rose; Capital Adequacy Ratio (CAR) remained adequate. - Labor market (NSA 2023 data): strict unemployment rate rose by 17.1 percentage points to 36.9 (44.4 for youth) percent in 2023; broad definition rose by 21.4 percentage points to 54.8 (61.4 for youth) percent in 2023. ### Outlook and risks - Growth projections: - 3¾ percent in 2025 and 2026. - About 3 percent in the medium term. - End of drought will boost growth in 2025, but increased global trade policy uncertainty (including announced U.S. tariffs) and weak diamond market will dampen momentum. - External sector projections: - CA deficit projected at 15.5 percent of GDP in 2025. - Medium-term CA range projected at 11–13 percent of GDP as oil exploration continues. - Official reserves projected to fall from 119.6 percent of the ARA threshold in 2024 to 88.6 percent of the threshold in 2025 (as Namibia does not plan to issue a successor to its maturing $750 million Eurobond). - Inflation outlook: annual average headline CPI inflation projected to ease to 4.1 percent in 2025 and remain near 4.5 percent in the medium term. - Risks to the outlook (tilted to the downside): - Further global trade policy shocks (notably announced U.S. tariffs affecting the diamond market). - Geopolitical fragmentation. - Weather shocks and increased weather volatility. - Weak diamond market. - Rolling back of recent fiscal consolidation and state-owned enterprise reforms. - Upside risks: - Moderation in global trade policy tensions. - Faster development of oil, gas, and green hydrogen projects. - Additional notes on external vulnerability: - Oil-exploration-related FDI is central to reserve accumulation but does not fully explain elevated CA deficits. - Namibia is relatively less exposed to global financing conditions than many emerging markets but could be affected by reduced oil-exploration related FDI inflows. ### Policy recommendations and priorities - Fiscal policy: - Exercise restraint over the public sector wage bill. - Calibrate the increase in capital spending to ensure a sustained primary surplus in FY25/26 and FY26/27. - Advance civil service reform to reduce the public wage bill and create room for growth-enhancing spending, including public investment. - Implement PIMA/C-PIMA recommendations to improve efficiency of public investment. - Monetary and financial sector policy: - To safeguard the peg, gradually align the policy rate with that of the SARB (taking advantage of SARB rate cuts to reduce the rate gap). - Modernize the liquidity management framework to strengthen the monetary policy transmission mechanism. - Continue efforts to ensure exit from the Financial Action Task Force (FATF) Grey List. - Natural resource management: - Develop a framework to manage the potentially large oil wealth and the wind and solar power resources. - Strike a balance between local beneficiation to foster job creation while ensuring an attractive investment climate. - Structural policies: - Foster private sector-led growth to reduce unemployment and inequality by reducing skill mismatches, decreasing red tape, optimizing regulations, and promoting digitalization. ### Additional contextual findings - Namibia’s experience with resource wealth: mineral wealth has not translated into high per-capita income; opportunity to exit the “middle-income trap” with oil discoveries but no firm investment commitments yet. - Recent shocks and structural challenges: - The 2023/24 drought depressed agricultural output and hydroelectric capacity and affected urban water supply. - The announced U.S. tariffs could further depress global demand for natural diamonds, a key export. - Financial specifics: - BoN policy rate: 6.75 percent (April 2025). - BoN rate lowered by 100 basis points since mid-2024; gap vs SARB currently 75 bps. - Exploration-related imports are estimated at 9.1 percent of GDP in 2024; BoN and NSA estimate 80–90 percent of FDI is spent on imports and the rest on local inputs. - Fiscal measures in FY24/25 budget included: adjusting nominal PIT brackets and increasing VAT registration threshold; reducing the non-mining CIT rate gradually from 32 percent to 28 percent by FY 2026/2027; broadening the tax base and addressing thin capitalization practices. *Source: IMF staff report on Namibia (May 28, 2025).* ### 12. Risks to the outlook are tilted to the downside (Annex I). As a small economy and ### 12. Risks to the outlook are tilted to the downside (Annex I) ### Risks to the outlook - Namibia is vulnerable as a small economy and commodity exporter to higher trade barriers and commodity price fluctuations, particularly the price of its main export, diamonds, which also faces serious competition from lab-grown diamonds. - A further worsening of global trade tensions and a deepening of economic fragmentation could negatively impact: - (1) external demand, particularly from Namibia’s main trading partner, South Africa, and - (2) SACU revenue, intensifying pressure on growth and the fiscal and external outlook. - Global financial tightening could slow growth through lower FDI and slower growth in the SACU area. - Domestic risks include continued high unemployment and inequality, potential social discontent and disruption, and pressure to roll back fiscal consolidation and SOE reforms. - Agriculture will likely face increasing volatility associated with weather shocks; water supply shortages can negatively affect mining of uranium and gold. - Upside risks: easing of global trade policy tensions and faster development of oil, gas, critical minerals, and green hydrogen projects than expected. - Sensitivity and shock estimates: - If the U.S. baseline tariff rate of 10 percent applies globally, Namibia's export revenue will drop by 0.1 percent and GDP growth would be lower by around 0.1 percentage point in 2025, compared with a counterfactual of no U.S. tariff adjustment this year. - A 10 percent negative price shock to diamonds leads to a 1.6 percent decline in export revenues (0.5 percent of GDP). - A 10 percent negative price shock to three key exported commodities (diamond, uranium, and gold) leads to a 5.6 percent drop in export revenues (1.9 percent of GDP) in 2025. ### Authorities’ views on outlook - Authorities project GDP growth of 3–4 percent in 2025 and expect growth to remain at this level over the medium term, supported by mining and energy sectors, public capital expenditure and infrastructure investment, and recovering agriculture. - Authorities highlighted downside risks including potential spillovers from intensified global trade policy shocks, further deterioration in the diamond market, and weather shocks. ### Policy discussions and priorities - Policy priorities since the 2023 Article Consultation remain broadly unchanged and focus on: - (i) activating fiscal reforms to lock in recent gains in public debt sustainability; - (ii) setting up a natural resource management framework; - (iii) strengthening the credibility of the currency peg; - (iv) enhancing the resilience of the financial sector; - (v) promoting sustainable and inclusive private sector-led growth, with strengthened emphasis on resilience to weather shocks and digitalization. ### A. Entrenching Debt Sustainability While Supporting Growth - Fiscal outcomes and debt dynamics: - Primary balance moved into surpluses in FY23/24 and FY24/25 for the first time in over a decade. - Gross public debt-to-GDP ratio peaked at 67.5 percent in FY22/23, is estimated to have dropped by 1½ percent of GDP in FY23/24 and remained broadly unchanged in FY24/25. - FY25/26 fiscal stance and projections: - FY25/26 budget and the March 2025 MTEF project primary surpluses (including privatization receipts) in FY25/26–FY27/28. - The FY25/26 budget implies a structural tightening of 1.7 percent of GDP, as measured by the change in the primary balance excluding SACU revenues. - A 3½ percent of GDP drop in SACU revenues causes the primary balance to drop by 1.7 percent of GDP to -0.4 percent of GDP. - One-off privatization receipts (0.8 percent of GDP) will help finance the deficit. - Medium-term fiscal adjustments and recommendations: - Beyond FY25/26, a further 1.3 percent of GDP tightening in the structural deficit is expected, mainly through implementing PSEMAS reforms (savings of 0.2 ppts of GDP in FY26/27) and reducing the wage bill, while introducing a dividend tax to offset a planned corporate income tax cut for non-mining companies. - Staff recommend a slightly larger fiscal adjustment: increase the size of consolidation by 0.5 percent of GDP in FY26/27 to target public debt of 61 percent of GDP by end-FY27/28. - Reactivating fiscal reforms recommended to preserve consolidation gains: - Implement a civil service reform to support wage bill moderation while enabling efficiency gains; nominal wage bill control may prove unsustainable without comprehensive reform. - Implement long-delayed PSEMAS reforms with a view to generating greater savings than currently envisaged. - Advance SOE reforms to reduce fiscal risks and generate savings; paid guarantees for SOEs totaled 0.4 percent of GDP in recent years; 0.5 percent of GDP budgeted in FY24/25 to settle tax arrears of public entities. - Planned inaugural publication of the SOE fiscal risk report in 2025 and finalizing the Public Enterprises Ownership Policy are key steps. - Continue to improve tax administration; Namibia Revenue Agency (NamRA) has stepped up scrutiny of tax assessments. - Increase revenue from fishing licenses: currently auctions only a small portion, yielding 0.1 percent of GDP. - Public debt management and financing needs: - Gross financing need (GFN) projected to be 25–28 percent of GDP in FY25/26–FY26/27 and below 21 percent of GDP thereafter. - Overall risk of sovereign debt distress assessed as moderate. - $750 million (5.2 percent of GDP) Eurobond repayment in October 2025 will significantly reduce the stock of foreign-currency debt. - Large domestic investor base provides stable funding; foreign debt from development institutions could provide long-term financing. - Example of concessional lending: NamPower contracted a World Bank loan (USD 138.5 million) in 2024, guaranteed by the Namibian government. - FY25/26 fiscal numbers (Projections, Percent of GDP): - Total revenue and grants, of which: 36.5 (24/25 Est.), 33.2 (25/26), 32.8 (26/27), 33.1 (27/28) - SACU revenues: 11.2, 7.7, 7.9, 8.2 - Total expenditure, of which: 40.4, 38.8, 37.7, 36.8 - Personnel: 14.1, 13.5, 12.8, 12.3 - Interest payment: 5.2, 5.2, 5.1, 5.1 - Capital expenditure: 3.9, 4.0, 3.9, 3.5 - Primary balance: 1.2, -0.5, 0.2, 1.4 - Primary balance plus privatization receipts: 1.2, 0.3, 0.2, 1.4 - Primary balance excluding SACU revenues: -10.0, -8.2, -7.7, -6.9 - Overall balance: -3.9, -5.7, -4.8, -3.7 - Public debt: 66.2, 62.3, 62.2, 62.0 - Fiscal adjustment composition in FY25/26 (Percent of GDP): - Expiration of the drought assistance (savings): 0.6 - Elimination of other one-offs (savings): 0.3 - Savings from wage moderation: 0.5 - Other: 0.4 - Total adjustment: 1.7 - Strengthening fiscal institutions and public investment management: - Planned draft amendment to the State Finance Bill to improve public financial management. - Implementing key recommendations from the recent PIMA/C-PIMA exercise would alleviate capacity gaps in public investment management. - Planned creation of a procurement court could help reduce inefficiency. - Scaling up adaptation spending: - Namibia is among the most arid countries in Africa with increasingly frequent droughts and declining annual rainfall. - Fiscal cost of drought relief over FY23/24–FY24/25 is estimated at about 1 percent of GDP. - Authorities prioritized adaptation; some measures include investment in water infrastructure and efforts to raise food productivity. - Namibia’s Nationally Determined Contribution, Second Update (2023) estimates priority measures will cost $6 billion through 2030 (of which $3.5 billion is for water resources and $1.5 billion for agriculture and food security), amounting to 48.5 percent of 2023 GDP. ### Authorities’ views on fiscal strategy - Committed to building fiscal buffers while supporting the economy, preserving primary surpluses, and reducing the public debt-to-GDP ratio despite the anticipated drop in SACU revenues. - Salary adjustments: after a large one-off upward salary adjustment last year, authorities resumed tight wage bill control and plan to implement PSEMAS reforms beginning in FY26/27. - Plan to implement a comprehensive civil-service reform supported by a functional review, explore expenditure reallocation toward growth-enhancing spending, establish a public procurement court, publish an inaugural risk report on state enterprises, finalize repeal of the State Finance Act and present the Public Finance Management Bill to Parliament, and implement selected PIMA recommendations in 2025. - The draft Public Enterprises Ownership Policy (PEOP) is being re-examined; authorities remain committed to minimizing fiscal risks from public enterprises. ### B. Establishing a Comprehensive Natural Resource Management Framework - Managing oil revenues: - A rigorous monitoring framework is required for transparent revenue projection and tracking, including accurate data on potential oil production quantity, timeline, and duration. - Initial phase priority: safeguard fiscal sustainability by reducing gross debt and avoiding premature asset accumulation; as debt levels decrease, development spending could be gradually increased in line with implementation capacity. - Sovereign wealth fund (Welwitschia Fund, WF): - Draft WF Act planned for parliamentary submission this year. - WF dual objectives: saving for future generations and serving as a fiscal and official reserves buffer. - WF rules should allow gradual adjustment of fiscal objectives to target the non-resource fiscal deficit, balancing development and preservation of wealth from non-renewable resources. - Annex VII of 2022 Article IV Staff Report noted WF operational as a savings fund with resources of N$460 billion (0.2 percent of GDP) reported in March 2025. - Authorities’ actions: - Technical committee constituted to review the existing Petroleum regime, including the fiscal regime, to enhance competitiveness and secure a fair share of hydrocarbon value. - Authorities plan to expand the monitoring framework developed based on earlier IMF TA on Petroleum Taxation. - Authorities emphasize rules governing the WF will prioritize reducing gross public debt during the initial phase of oil revenues before transitioning to building financial wealth and financing development spending. ### C. Safeguarding the Currency Peg - (Heading present in source; further content not included in the supplied excerpt.) *IMF staff summary based on the supplied document excerpt.* ### 26. The peg to the rand has proven effective in containing inflation in Namibia. South ### 26. The peg to the rand has proven effective in containing inflation in Namibia. South ### Monetary policy, the peg, and inflation dynamics - The peg to the rand has provided a nominal anchor; Namibia's inflation has closely tracked inflation in South Africa. - The Bank of Namibia (BoN) has reduced its policy rate more rapidly than the South African Reserve Bank (SARB) to reduce the cost of credit and support growth. - The policy rate of the BoN has remained "50–75 basis points below the SARB since February 2025." - Monetary conditions in Namibia remained looser than in South Africa, indicated by: - a negative interest rate differential in deposit rates that widened in tandem with the differential for the policy rate (Text Figure 11); and - excess liquidity. - Weak monetary transmission due to financial frictions may have impeded capital flows in response to the interest rate differential. - The BoN should align its policy rate with the SARB in the near term to safeguard the peg, taking advantage of SARB rate reductions. - Alignment will safeguard foreign exchange buffers against potential drains and strengthen the credibility of the peg amid heightened policy uncertainty. - The BoN should stand ready to foster the alignment, especially if reserve cover comes under pressure. - Additional monetary operations recommendations from recent technical assistance include: - adoption of a mid-corridor; - enhancing liquidity monitoring and forecasting; and - reconfiguring the minimum reserve requirement by introducing averaging, calibrating it better to policy shocks, and remunerating at the policy rate. *Authorities’ views* - The authorities aim for policy-rate convergence over the medium-term but consider the current policy rate differential justifiable to support growth and address high unemployment. - They report no signs of inflationary pressure or excessive capital outflows due to the interest rate differential, and reserve coverage remains adequate. - The BoN is ready to act when signs of pressure on reserves emerge, including using BoN bill issuance whose rates are aligned with those of the SARB (Annex V). - The BoN has developed a daily liquidity forecasting model and plans to expand the forecasting horizon with further IMF technical assistance. - Regarding capital flow management measures (CFMs), authorities noted removal of outdated controls and administrative requirements for exporters; exporters must repatriate within 180 days but can now hold proceeds in foreign currency accounts in Namibia. ### Capital flows, reserves, and capital flow management measures - Stable gross international reserves and muted capital flows accompanied the BoN's faster policy easing. - FDI inflows supported the accumulation of reserves. - Capital flow management measures, notably the "45-percent minimum domestic asset requirement on NBFIs," favored retention of capital in the domestic market. - Persistent weakness in the diamond market, declining SACU transfers, and upcoming Eurobond amortization will put pressure on foreign reserves. - The BoN has been closely monitoring capital outflows and should strengthen liquidity management while capitalizing on payment system upgrades and harmonizing CFMs with best practices to improve resource allocation. ### Macro-financial risks and banking sector stability - The banking system remains broadly stable but with lingering vulnerabilities; credit growth remains subdued and households remain burdened by debt service. - Half of bank credit goes to mortgages; implementing loan-to-value ratio regulations, including downpayments, is important to reduce future NPLs. - The sovereign-bank nexus is a potential source of macroprudential risk and needs monitoring. - Systemic risk is assessed as low: banks remain profitable, liquid, and well-capitalized. - Suggested targeted measures to prevent risk buildup: - consider implementing a systemic risk buffer for sovereign exposures that exceed a certain threshold; and - conduct further analysis of the structure of exposures in banking and trading books to ensure appropriate weights. - Progress on 2018 FSSA recommendations continued, covering bank supervision structure; crisis management and preparedness; risk-based supervision; and macroprudential policies. - Staff encouraged finalizing implementation, including work on countercyclical capital buffers (CCyB) as a macroprudential tool and strengthening bilateral cross-border cooperation with supervisors of foreign parent banks on bank resolution policy. - A first-time safeguards assessment of the BoN (completed in March 2023) found relatively good safeguards in some areas and noted strengthened oversight and management of foreign reserves; concerns remain that BoN autonomy could weaken due to continuation of the small-and-medium-enterprise loan facility and inertia towards amending the BoN Act. *Authorities’ views* - Authorities assess banking sector risks to be broadly contained. - The capital conservation buffer of "2.5 percent" was implemented in September 2024. - They are finalizing a framework to calibrate the CCyB and plan clear communication and timing to avoid unintended procyclical tightening. - Authorities are working with the SARB to strengthen cooperation in implementing the crisis resolution framework. - Bank holdings of Namibia’s sovereign debt (mainly treasury bills), mostly held to maturity, are monitored and not considered a major risk warranting targeted measures. - Authorities continue efforts to improve the AML/CFT system and to digitalize payments through the Instant Payment System to promote financial inclusion; they will continue to explore a Central Bank Digital Currency (CBDC) readiness should a use case be established. ### Financial integrity and AML/CFT progress - Commendable progress has been made since Namibia was placed on the FATF “grey list” in February 2024. - The Financial Intelligence Center (FIC) received additional human and financial resources, implemented new supervisory tools, and received training. - Other agencies received resources and training to better identify, investigate, and prosecute terrorist financing. - Key areas for further improvement include: - increasing the filing of the beneficial owners of legal persons and arrangements; - expanding real-time access for relevant authorities; - enhancing capacity to investigate and prosecute money laundering offenses; and - establishing and operationalizing the National Counter Terrorism Center. - Authorities should continue to expedite Namibia’s exit from the FATF “grey list.” ### Payments, digitalization, and BoN strategic priorities - The BoN’s Strategic Plan for 2025–27 prioritizes adopting advanced digital tools and fostering an inclusive and resilient financial system. - The BoN is working on an Instant Payment Project, aiming to launch the platform by "late 2025 or early 2026" to provide efficient and instantly accessible payment services that enhance financial inclusion. - The BoN is participating in Project Sunbird, a cross-border payments initiative, under the Common Monetary Area (CMA). ### Structural reform agenda and medium-term priorities - Bold structural reforms are essential to achieve authorities’ objectives in: - Harnessing natural resources: - Investment should prioritize economic diversification and job creation (SIP Labor). - Energy investments (including green hydrogen) should focus on generating a value chain that supports job creation (World Bank CP, 2025). - A comprehensive strategy with robust governance is essential. - Cabinet approved a local content bill to promote sustainable economic diversification; flexible implementation is crucial. - Clarity on government approach to fiscal stability for the oil and mineral sectors, aligned with best practices, is essential for attracting foreign investment. - Driving private sector-led growth: - Reforming the dominance of the public sector (which enjoys a pay premium) could create space for private sector development. - Reform public employment, including in SOEs, to improve efficiency and activate the labor market. - Unequal access to land, finance, and product markets hinders private sector dynamism. - Increase access to affordable housing, education, and health to enhance human capital; strengthen infrastructure. - Finalize revisions to the Investment Promotion Act to streamline regulations and reduce red tape. - AfCFTA ratified in 2019 could spur export-oriented growth, though implementation may require adjustments under the SACU Agreement. - Foster non-resource-intensive sectors such as tourism and agriculture. - Developing resilience to weather shocks: - Public investment in upgrading water infrastructure and R&D for agricultural products. - Strengthen social assistance programs for food security and expand access to effective crop insurance. - Enhance social services for climate migrants and diversify electricity generation beyond hydropower, using prudent financing from multilateral development institutions. - Additional medium-term reforms and sequencing: - Implement active labor market policies to reduce skill mismatches by aligning education and TVET with labor market needs and conducting an occupational skills audit. - Strengthen social protection: only "about a third of vulnerable persons covered by social assistance as of 2022"; expand coverage to address recurrent weather shocks and elevated unemployment. - Promote financial access and digitalization: support MSMEs, invest in digital connectivity, improve the digital business ecosystem, and expedite digitalization of government services. *Authorities’ views* - Authorities broadly agreed with staff on challenges and highlighted ongoing efforts to mitigate reliance on natural resources and enhance job creation. - They are establishing a new oil and gas regulator and will implement local content policy to maximize benefits while ensuring investment incentives. - They plan to strengthen financial discipline of SOEs, re-examine the draft PEOP, and continue public-private collaboration to identify and rectify constraints for businesses. - Authorities are prioritizing digitalization of procurement and budgeting and plan to digitize other government services. - Investments to improve rail infrastructure and initiatives to build resilience to weather shocks (water infrastructure, seed improvement program, and private participation in large-scale government farms) are underway. ### Statistical and data issues - Data provision is broadly adequate for surveillance but shortcomings exist (Annex VII). - Key areas for improvement: - coverage and granularity of national accounts, fiscal and financial statistics, and prices data; - granularity of external sector statistics and reserve coverage. ### Staff appraisal and policy recommendations - Recent developments and outlook: - Namibia’s economy continues to expand, mainly thanks to foreign investment in mineral wealth, but job-rich private sector-led growth remains elusive. - Economic growth has been resilient to terms-of-trade and weather shocks; inflation has slowed; the external position strengthened as FDI covered the import bill associated with oil exploration. - Unemployment, particularly among youth, has increased sharply; a drought caused widespread food insecurity. - Growth outlook and risks: - The growth outlook is subdued and faces predominantly downside risks. - Near-term headwinds: increased global trade policy uncertainty and the weak diamond market will weigh on 2025 momentum. - Key downside risks include intensification of global trade tensions, further shocks to diamond prices, spillovers from tightening global financial conditions, lower-than-expected future SACU transfers, and social pressure for greater government spending that could reverse fiscal consolidation and SOE reforms. - Upside risks: development and production of oil, gas, and green hydrogen (excluded from staff’s conservative baseline) and significant moderation of global trade policy tensions. - Fiscal stance and reforms: - The disciplined fiscal stance adopted for this year is commended; additional medium-term efforts are needed to entrench favorable public debt dynamics and support the external position. - The planned large increase in the structural primary balance (excluding SACU transfers) through resuming wage bill control and PSEMAS reform this year is crucial to protect gains in containing public debt growth. - A consolidation greater than that outlined in the MTEF will be needed to ensure a steady decline in the debt-to-GDP ratio while creating space for growth-enhancing expenditure, expanding social protection, and building resilience to weather shocks. - Implementing fiscal reforms is essential to support consolidation and private sector-led growth: - success of durably reducing the wage bill depends on comprehensive civil service reform based on a functional job review; - finalizing the PEOP and outlining a roadmap for SOE reforms are critical to minimize fiscal risks and level the playing field for the private sector; - submitting the amendment to the State Finance Bill to Parliament and implementing key PIMA/C-PIMA recommendations would enhance public financial management; - strengthen revenues via tax administration efforts and boosting revenues from natural resources, such as fishing, via greater use of competitive licensing processes; - given active oil and gas exploration, passing the WF Act will be crucial for safeguarding long-term macroeconomic stability and supporting economic development. *Source: IMF staff analysis and authorities’ views as presented in the chapter.* ### 45. The BoN should restore interest rate parity with the SARB to safeguard the peg in the ### The BoN should restore interest rate parity with the SARB to safeguard the peg in the near term ### Monetary policy and exchange rate peg - 45. The BoN should restore interest rate parity with the SARB to safeguard the peg in the near term, taking advantage of SARB rate reductions. - While there is currently no evidence of destabilizing capital outflows, risks could materialize given the heightened global policy uncertainty, the drop in SACU transfers, and a possibly prolonged decline in the diamond market. ### Financial sector resilience and supervision - 46. Efforts to promote a resilient financial system, digitization, and financial inclusion are welcome. - Implementation priorities and measures: - Implementation of the CCyB, Instant Payment System, and strengthened cooperation on crisis resolution will bolster financial sector resilience and inclusion. - While the financial system is stable, continued vigilance is critical. - Targeted measures should be used if there is a further buildup of risks related to the sovereign-bank nexus. - Efforts to exit from the FATF Grey List should continue. ### Structural reforms and growth prospects - 47. Structural reforms are crucial for fostering sustainable and inclusive private sector-led growth. - Growth opportunities and policy directions: - The prospect of oil, gas, and green hydrogen industries in the country provides an opportunity to build related value chains and foster job creation. - Tailoring technical education programs to align with the emerging needs of these industries, implementing a balanced approach to local beneficiation and fiscal rebalancing policies, and providing greater clarity on related policies will maximize these benefits. - More broadly, efforts toward diversification and development should focus on addressing key barriers, including reducing skill mismatches, decreasing red tape, improving access to public services, upgrading infrastructure, and fostering digitalization. *NAMIBIA INTERNATIONAL MONETARY FUND 25* ### 48. Staff recommends that the next Article IV consultation with Namibia be held on the ### 1namea2025001-print-pdf - 48. Staff recommends that the next Article IV consultation with Namibia be held on the ### Recommendation on Article IV consultation - Staff recommends that the next Article IV consultation with Namibia be held on the standard 12-month cycle. ### Financial sector developments (Figure 1) - Household mortgages continue to account for close to half of private sector credit. - Debt to disposable income moderated amid lower credit intake by households. - Both Mortgages and non-mortgage credit growth remains subdued. - Household mortgages are primary contributors to the NPL. - Namibian banks’ assets exposure to the public sector is comparable to South Africa but higher than Botswana and Mauritius. - Banks’ assets exposure to sovereign debt has risen since the previous 2018 FSAP. - Financial soundness indicators (selected): - Nonperforming loans to total gross loans (2024): 5.6 percent. - Regulatory capital to risk-weighted assets (2024): 17.3 percent. - Return on assets (2024): 3.4 percent. - Liquid assets to total assets (2024): 16.7 percent. - Customer deposits to total (non-interbank) loans (2024): 109.5 percent. - Foreign currency liabilities to total liabilities (2024): 7.5 percent. ### Recent economic developments (Figure 2) - Diamond production shows sign of slowing down, while gold and uranium production continues its upward trend. - Global diamond price declines; uranium price declined from the peak; gold price continues to rise. - External current account has been shaped by the surge in oil and gas exploration. - The fiscal balance largely tracked SACU transfers; spending fell in FY21/22 and rose markedly in FY24/25. - Banks are adequately capitalized and asset quality moderated. - Credit growth to the private sector remains subdued. ### Climate indicators: vulnerabilities and developments (Figure 3) - Namibia contributes minimally to global GHG emissions, with its carbon intensity low within AFR. - It ranks 85th in vulnerability on the IMF-Adapted NDGAIN Index and has ample potential to enhance readiness. - Its emissions have increased in tandem with rising trends in other AFR countries. - It faces susceptibility to floods and droughts, with some indications of heightened intensity. - Electricity matrix is cleaner than regional peers but relies heavily on carbon-intensive imports and dependence on hydro increases vulnerability to droughts. - High vulnerability to changes in agricultural yields poses food security challenges, despite stronger disaster preparedness than most other AFR countries. - Fuel pricing is above the supply costs for most fuels (no explicit consumer fuel subsidies). - Over the past 20 years, average heat days per year has significantly increased, showing increased volatility. - Namibia can achieve its NDC targets without additional mitigation efforts, as the target exceeds historical peak. - Relatively high agricultural water use and low water use efficiency can be further exacerbated by climate change. - Public investment in renewable energy has fluctuated, focusing on solar, hydro, and biofuels. - Rural electrification rates are comparable with the regional average, but highly uneven. ### Selected economic indicators (Table 1): output, prices, external accounts (2022–30) - Real GDP growth: - 2022: 5.4 - 2023: 4.4 - 2024 (Est.): 3.7 - 2025–2030 (Proj.): 3.8, 3.7, 2.9, 3.0, 3.0, 3.0 - Nominal GDP (billions of N$): - 2022: 205.6 - 2023: 228.9 - 2024 (Est.): 245.1 - 2025: 266.8 - 2030 (Proj.): 389.9 - Nominal GDP per capita (USD): - 2022: 4,407 - 2023: 4,236 - 2024 (Est.): 4,472 - 2025 (Proj.): 4,673 - 2030 (Proj.): 5,513 - CPI Inflation, average: - 2022: 6.1 - 2023: 5.9 - 2024 (Est.): 4.2 - 2025–2030 (Proj.): 4.1, 4.5, 4.5, 4.5, 4.5, 4.5 - Current account balance (percent of GDP): - 2022: -12.6 - 2023: -15.3 - 2024 (Est.): -15.3 - 2025 (Proj.): -15.5 - 2030 (Proj.): -11.3 - Gross official reserves (percent of GDP): - 2022: 22.3 - 2023: 23.2 - 2024 (Est.): 25.1 - 2025 (Proj.): 18.4 - 2030 (Proj.): 22.2 - Public debt, gross (percent of GDP): - 2022: 67.5 - 2023: 66.0 - 2024 (Est.): 66.2 - 2025–2030 (Proj.): 62.3, 62.2, 61.2, 60.1, 60.1, 59.3 - Main exports: Diamonds, Fish, Gold, Uranium, Copper. - Key export markets: South Africa, Botswana, China, Zambia, Belgium. - Population (2024, millions): 2.9 (displayed as "4471.8" in source under Per-capita GDP (2024, USD):4471.8 — preserved as shown in source). - Per-capita GDP (2024, USD): 4,471.8 (preserved formatting as in source). ### Fiscal operations (Tables 2–3): central government, 2021/22–2030/31 - Revenue and grants (millions of Namibian dollars): - 2021/22: 55,365 - 2022/23: 64,402 - 2023/24: 81,873 - 2024/25: 91,465 - 2030/31 (Proj.): 132,113 - Tax revenue (millions): - 2021/22: 51,248 - 2022/23: 55,459 - 2023/24: 74,967 - 2024/25: 86,407 - 2030/31 (Proj.): 123,639 - SACU receipts (millions): - 2021/22: 14,751 - 2022/23: 14,190 - 2023/24: 24,348 - 2024/25: 28,047 - 2030/31 (Proj.): 33,518 - Total expense (millions): - 2021/22: 71,431 - 2022/23: 76,399 - 2023/24: 87,469 - 2024/25: 101,327 - 2030/31 (Proj.): 145,143 - Personnel (millions): - 2021/22: 30,210 - 2024/25: 35,262 - 2030/31 (Proj.): 48,600 - Interest payments and borrowing charges (millions): - 2021/22: 7,975 - 2024/25: 12,919 - 2030/31 (Proj.): 19,793 - Overall balance (millions): - 2021/22: -16,048 - 2022/23: -11,985 - 2023/24: -5,585 - 2024/25: -9,849 - 2030/31 (Proj.): -13,010 - Overall fiscal balance (percent of GDP): - 2022/23: -5.7 - 2023/24: -2.4 - 2024/25: -3.9 - 2025/26 (Proj.): -5.7 - 2030/31 (Proj.): -3.3 - Overall fiscal balance excluding SACU (percent of GDP): - 2022/23: -12.4 - 2023/24: -12.8 - 2024/25: -15.1 - 2025/26 (Proj.): -13.4 - 2030/31 (Proj.): -11.7 - Public and publicly guaranteed debt (millions of Namibian dollars): - 2021/22: 137,716 - 2022/23: 155,428 - 2023/24: 167,697 - 2024/25: 180,968 - 2030/31 (Proj.): 259,550 ### Balance of payments (Table 4), 2022–30 - Current account balance (millions of USD): - 2022: -1,588 - 2023: -1,892 - 2024 (Est.): -2,052 - 2025 (Proj.): -2,204 - 2030 (Proj.): -2,075 - Exports, f.o.b. (millions of USD): - 2022: 4,418 - 2023: 4,659 - 2024 (Est.): 4,588 - 2025 (Proj.): 4,728 - 2030 (Proj.): 5,846 - Diamonds exports (value, millions USD): - 2022: 840 - 2023: 957 - 2024 (Est.): 646 - 2025 (Proj.): 528 - 2030 (Proj.): 740 - Imports, f.o.b. (millions of USD): - 2022: -6,341 - 2023: -6,206 - 2024 (Est.): -6,753 - 2025 (Proj.): -6,849 - 2030 (Proj.): -8,495 - Namibia food and fertilizer imports (millions of USD): - 2022: 746 - 2023: 728 - 2024 (Est.): 781 - 2025 (Proj.): 800 - 2030 (Proj.): 990 - Oil imports (petroleum products, millions USD): - 2022: -1,562 - 2023: -1,475 - 2024 (Est.): -1,330 - 2025 (Proj.): -1,167 - 2030 (Proj.): -1,319 - Current transfers (net, millions USD): - 2022: 1,014 - 2023: 1,405 - 2024 (Est.): 1,697 - 2025 (Proj.): 1,430 - 2030 (Proj.): 1,810 - Of which: SACU receipts (millions USD): - 2022: 876 - 2023: 1,182 - 2024 (Est.): 1,479 - 2025 (Proj.): 1,221 - 2030 (Proj.): 1,554 - Financial account (millions USD): - 2022: -1,677 - 2023: -1,974 - 2024 (Est.): -2,296 - 2025 (Proj.): -1,331 - 2030 (Proj.): -2,174 - Foreign direct investment, net (millions USD): - 2022: -1,059 - 2023: -2,612 - 2024 (Est.): -2,022 - 2025 (Proj.): -2,177 - 2030 (Proj.): -2,612 - Gross international reserves (millions USD): - 2022: 2,799 - 2023: 2,873 - 2024 (Est.): 3,362 - 2025 (Proj.): 2,629 - 2030 (Proj.): 4,085 - Reserves in months of imports: - 2022: 4.0 - 2023: 3.8 - 2024 (Est.): 4.4 - 2025 (Proj.): 3.4 - 2030 (Proj.): 4.5 ### Monetary accounts (Table 5), 2022–30 - Broad money (millions of Namibian dollars): - 2022: 129,958 - 2023: 143,800 - 2024 (Est.): 157,721 - 2025 (Proj.): 172,116 - 2030 (Proj.): 253,197 - Credit to the private sector (millions): - 2022: 111,235 (claims on private sector) - 2023: 114,309 - 2024 (Est.): 118,322 - 2025 (Proj.): 124,134 - 2030 (Proj.): 160,824 - 12–month percent change in credit to the private sector: - 2022: 4.2 - 2023: 2.8 - 2024 (Est.): 3.5 - 2025 (Proj.): 4.9 - 2030 (Proj.): 5.5 - Reserve money (millions): - 2022: 9,605 - 2023: 9,445 - 2024 (Est.): 11,428 - 2025 (Proj.): 12,471 - 2030 (Proj.): 18,347 ### Financial soundness indicators (Table 6), 2016–24 (selected series) - Capital to assets: - 2016: 9.3 - 2020: 9.6 - 2024: 10.2 - Regulatory Tier 1 capital to risk-weighted assets: - 2016: 12.4 - 2022: 14.7 - 2024: 15.4 - Nonperforming loans net of provisions to capital: - 2016: 7.0 - 2020: 24.3 - 2024: 14.2 - Noninterest expenses to gross income: - 2016: 53.2 - 2020: 61.0 - 2024: 54.8 - Return on equity: - 2016: 22.5 - 2020: 10.8 - 2024: 20.2 ### Indicators of capacity to repay the Fund (Table 7), 2021–30 (SDR and USD) - Quota (SDR million): 191.1 (2021–2030). - Stock of existing and prospective Fund credit (SDR million): - 2021–2023: 191.1 - 2024 (Est.): 143.3 - 2025 (Proj.): 47.8 - 2026–2030 (Proj.): 0.0 - Fund obligations (repurchases and charges) in percent of Quota: - 2024: 32.6 - 2025: 54.4 - 2026: 27.7 - Fund obligations in percent of GDP: - 2024: 0.5 - 2025: 0.7 - 2026: 0.3 - Fund credit outstanding as percent of Quota: - 2021–2023: 100.0 - 2024: 75.0 - 2025: 25.0 - 2026–2030: 0.0 - Memorandum (USD): - GDP (2024, USD million): 13,323 - Exports of goods and services (2024, USD million): 6,079 - Gross international reserves (2024, USD million): 3,369 - Government revenue (2024, USD million): 5,020 - External debt, public (2024, USD million): 2,127 *Source: IMF staff calculations and Namibian authorities, as presented in the provided content.* ### Annex I. Risk Assessment Matrix ### Annex I. Risk Assessment Matrix ### Conjunctural Risks - Trade policy and investment shocks - Source: Higher trade barriers or sanctions reduce external trade, disrupt FDI and supply chains, and trigger further U.S. dollar appreciation, tighter financial conditions, and higher inflation. - Likelihood: High - Expected Impact on the Economy: High. Reduced external trade and disruption of supply chains and FDI would adversely affect external demand and growth. Spillovers from South Africa could emerge as SACU revenues decline and inflation picks up, resulting in worsening fiscal position and higher interest rates. - Recommended Policy Response: - Policy response to cyclic shocks be predicated on sustained debt and concrete measures to ensure a strong commitment to medium-term fiscal consolidation to preserve debt sustainability. - Expedite the alignment of the policy rate with South Africa to ensure anchoring of inflation expectations. - Prioritize structural reforms aimed at facilitating reallocation of productive resources and investment. - Tighter financial conditions and systemic instability - Source: Higher-for-longer interest rates and term premia amid looser financial regulation, rising investments in cryptocurrencies, and higher trade barriers trigger asset repricing, market dislocations, weak bank and NBFI distress, and further U.S. dollar appreciation, which widens global imbalances, worsens debt affordability, and increases capital outflow from EMDEs. - Likelihood: Medium - Expected Impact on the Economy: Medium. If interest rates are higher for longer, this can increase financing costs. Increasing uncertainty can also lead to capital outflows, an increase in risk premia and a worsening fiscal and external position. - Recommended Policy Response: - Fiscal response same above. - Expedite the alignment of the policy rate with South Africa to ensure anchoring of inflation expectations. - Regional conflicts - Source: Intensification of conflicts (e.g., in the Middle East, Ukraine, Sahel, and East Africa) or terrorism disrupt trade in energy and food, tourism, supply chains, remittances, FDI and financial flows, payment systems, and increase refugee flows. - Likelihood: Medium - Expected Impact on the Economy: High. Trade disruptions and conflicts could lead to higher food and energy prices, increasing inflation and de-anchoring inflation expectations. The external position could deteriorate, and reserves could come under pressure. Spillovers through the supply chains could lead to sluggish economic growth and worsen poverty and inequality. - Recommended Policy Response: - Fiscal response same as above. - Expand well targeted social protection to households and firms while maintaining fiscal discipline. - Expedite the alignment of the policy rate with South Africa to ensure anchoring of inflation expectations. - Prioritize bold structural reforms to support private sector led growth and foster economic diversification. - Commodity price volatility - Source: Supply and demand volatility (due to conflicts, trade restrictions, OPEC+ decisions, AE energy policies, or green transition) increases commodity price volatility, external and fiscal pressures, social discontent, and economic instability. - Likelihood: Medium - Expected Impact on the Economy: High. Lower commodity prices may worsen the terms of trade given the importance of mineral exports. However, higher commodity prices could adversely impact imports of food and fuel, increasing core inflation and further worsening the cost of living for households. - Recommended Policy Response: - Fiscal response same as above. - Expand well targeted social protection to cushion vulnerable households. - Expedite the alignment of the policy rate with South Africa to ensure anchoring of inflation expectations. - Prioritize bold structural reforms to support private sector led growth and foster economic diversification. ### Structural Risks - Deepening geoeconomic fragmentation - Source: Persistent conflicts, inward-oriented policies, protectionism, weaker international cooperation, labor mobility curbs, and fracturing technological and payments systems lead to higher input costs, hinder green transition, and lower trade and potential growth. - Likelihood: High - Expected Impact on the Economy: High. Geo-economic fragmentation would negatively impact growth and external demand, through its impact on South Africa and key markets. As Namibia is heavily reliant on imports (e.g. fuel, food, and fertilizers), higher input costs could lead to heightened inflation, a worsened external position, sluggish economic growth, depleted reserves, and heightened inequality. - Recommended Policy Response: - Expand well-targeted support to vulnerable households to mitigate the impact of higher fuel and food prices, while maintaining fiscal discipline. - Prioritize diversification efforts. - Implement bold structural reforms to enhance competitiveness and resilience. - Climate change - Source: Extreme climate events driven by rising temperatures cause loss of life, damage to infrastructure, food insecurity, supply disruptions, lower growth, and financial instability. - Likelihood: Medium - Expected Impact on the Economy: High. A state of emergency related to food security has been declared in Namibia, primarily due to the ongoing drought. Extreme weather events could worsen the situation, resulting in more food and water shortages. This can strain fiscal position. - Recommended Policy Response: - Step up provision of targeted support to vulnerable households to mitigate the impact. - Enhance climate change adaptation policies and implement fiscal reforms to create room for adaptation investment. - Strengthened cooperation with international relief agencies on monitoring and support delivery. - Social discontent - Source: Real income loss, spillovers from conflicts, dissatisfaction with migration, and worsening inequality ignite social unrest, populism, polarization, and resistance to reforms or suboptimal policies. - Likelihood: Medium - Expected Impact on the Economy: High. Social tension can disrupt institutions, key infrastructure and supply channels leading to negative effects on employment, economic growth, risk premia and financing costs. - Recommended Policy Response: - Implement bold structural reforms to enhance competitiveness and resilience, with requisite consultation with key stakeholders. - Frontload fiscal adjustment to preserve debt sustainability. ### Domestic Risks - Development of the Oil Sector - Source: There is a risk that investments do not benefit the local economy. - Likelihood: Medium - Expected Impact on the Economy: Medium. Without effective management, the country may not benefit from potential oil revenues and could remain in the middle-income trap, facing high levels of inequality. - Recommended Policy Response: - Concentrate on strategies to avoid the resource curse, ensuring sustainable economic development. - Address skill mismatches and skill gaps to benefit from potential oil revenues. - Diamonds - Source: Weak demand conditions in the market may be structural and not recover to previous trend; may be exacerbated by pressure from lab grown diamond. - Likelihood: Medium - Expected Impact on the Economy: Medium. Prolonged weak global demand and competition from lab-grown diamonds continues to adversely affect the sector. This will adversely affect growth, exports and fiscal revenues. - Recommended Policy Response: - Deeper fiscal consolidation to offset losses in revenue. - Accelerate structural reforms to support private sector led growth and foster economic diversification. - Lower than anticipated SACU revenues - Source: SACU revenue transfers have been volatile and there is a risk of lower SACU receipts in the medium term. - Likelihood: Medium - Expected Impact on the Economy: Medium. Prolonged lower SACU revenue transfers in the medium term will worsen the fiscal position and put pressure on foreign reserves. - Recommended Policy Response: - Deeper fiscal consolidation to offset losses in revenue. - Expedite the alignment of the policy rate with South Africa. *Based on the latest G-RAM (February 20, 2025). The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path. The relative likelihood is the staff’s subjective assessment of the risks surrounding the baseline (“low” is meant to indicate a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly. The conjunctural shocks and scenarios highlight risks that may materialize over a shorter horizon (between 12 to 18 months) given the current baseline. Structural risks are those that are likely to remain salient over a longer horizon.* ### 1. Debt coverage in the DSA: 1/ ### 1. Debt coverage in the DSA: 1/ ### Coverage and scope - Chosen coverage: Budgetary central government. - 1a. If central government, are non-central government entities insignificant? No - Subsectors captured in the baseline: - Budgetary central government: Yes - Extra budgetary funds (EBFs): No - Social security funds (SSFs): No - State governments: No - Local governments: No - Public nonfinancial corporations: No - Central bank: No - Other public financial corporations: No - Commentary: Coverage in this SRDSA is of the budgetary central government, consistent with the debt coverage data provided by the authorities. Consolidated general government debt figures are not yet available. While provisions exist for Regional Councils and Local Governments to borrow for capital projects, Regional Councils have not used this option. Moreover, the borrowing by Local Governments remains minimal. In December 2022, Namibia joined the Special Data Dissemination Standard (SDDS) and is working with the IMF’s Statistics Department to compile and disseminate data on General Government operations. ### Instrument coverage and accounting - Basis of recording: Not applicable (explicitly stated "Not applicable" for valuation of debt stock). - Reporting on Intra-Government Debt Holdings: Nonfin. pub. corp. / GG: expected / State govt. / Local govt. / CG / CPS / Debt securities — presented in the original table format; budgetary central government is the perimeter shown for debt stock reporting. - Valuation definitions present in source: nominal value (5/), face value (6/), market value (7/). - Recording basis options mentioned: Non-cash basis 4/; Cash basis; Consolidated; Non-consolidated. ### Public debt structure indicators (key datapoints and characteristics) - Domestic creditors held about 78 percent of public debt in FY 2024/25. - 43 percent of the external debt is issued in rand. - A large proportion of debt is issued at longer maturities as part of the government’s debt strategy to mitigate rollover risks and diversify the maturity profile. - Residual maturity: 6. years (as listed in figure caption). - Debt by currency, holder, instrument, governing law, and maturity are presented in figure panels (perimeters noted: central government for currency holder panels; general government for governing law and instruments). ### Baseline scenario (Figure 4) — key projections and statistics (Percent of GDP unless indicated otherwise) - Public Debt: 66.2 (Actual, 2024); 61.7 (2025); 61.4 (2026); 61.0 (2027); 60.3 (2028); 59.5 (2029); 59.0 (2030); 58.4 (2031); 57.6 (2032); 56.7 (2033); n.a.; n.a. - Change in Public Debt: 0.2 (2024); -4.5 (2025); -0.4 (2026); -0.3 (2027); -0.7 (2028); -0.8 (2029); -0.6 (2030); -0.6 (2031); -0.8 (2032); -0.9 (2033); n.a.; n.a. - Contribution of identified flows: -0.1 (2024); -4.2 (2025); -0.4 (2026); -0.5 (2027); -0.7 (2028); -0.8 (2029); -0.7 (2030); -0.7 (2031); -0.9 (2032); -0.9 (2033); n.a.; n.a. - Primary deficit: -1.2 (2024); 0.5 (2025); -0.2 (2026); -1.4 (2027); -1.7 (2028); -1.7 (2029); -1.7 (2030); -1.7 (2031); -1.7 (2032); -1.7 (2033); n.a.; n.a. - Noninterest revenues: 36.5 (2024); 33.2 (2025); 32.8 (2026); 33.1 (2027); 33.3 (2028); 33.3 (2029); 33.3 (2030); 33.3 (2031); 33.3 (2032); 33.3 (2033); n.a.; n.a. - Noninterest expenditures: 35.3 (2024); 33.7 (2025); 32.6 (2026); 31.7 (2027); 31.6 (2028); 31.5 (2029); 31.5 (2030); 31.5 (2031); 31.5 (2032); 31.5 (2033); n.a.; n.a. - Automatic debt dynamics: -0.6 (2024); -1.4 (2025); -0.1 (2026); 0.9 (2027); 1.0 (2028); 0.9 (2029); 1.0 (2030); 1.0 (2031); 0.8 (2032); 0.8 (2033); n.a.; n.a. - Real interest rate and relative inflation: 2.1 (2024); 1.0 (2025); 2.1 (2026); 2.7 (2027); 2.8 (2028); 2.7 (2029); 2.7 (2030); 2.7 (2031); 2.5 (2032); 2.4 (2033); n.a.; n.a. - Real interest rate: 1.9 (2024); 0.6 (2025); 1.9 (2026); 2.6 (2027); 2.6 (2028); 2.5 (2029); 2.6 (2030); 2.6 (2031); 2.3 (2032); 2.2 (2033); n.a.; n.a. - Relative inflation: 0.2 (2024); 0.4 (2025); 0.2 (2026); 0.2 (2027); 0.2 (2028); 0.1 (2029); 0.1 (2030); 0.1 (2031); 0.1 (2032); 0.1 (2033); n.a.; n.a. - Real growth rate: -2.5 (2024); -2.4 (2025); -2.2 (2026); -1.8 (2027); -1.8 (2028); -1.8 (2029); -1.7 (2030); n.a.; -1.7 (2032); -1.6 (2033); -1.6 (2034); n.a. - Other identified flows: 1.7 (2024); -3.3 (2025); -0.1 (2026); 0.0 (2027); 0.0 (2028); 0.0 (2029); 0.0 (2030); 0.0 (2031); 0.0 (2032); 0.0 (2033); n.a.; n.a. - Contingent liabilities: 0.00 across listed years (2024–2033) n.a. entries for beyond. - (minus) Interest Revenues: 0.00 across listed years. - Contribution of Residual: 0.3 (2024); -0.3 (2025); 0.1 (2026); 0.1 (2027); 0.0 (2028); 0.1 (2029); 0.1 (2030); 0.1 (2031); 0.1 (2032); 0.1 (2033); n.a.; n.a. - Gross Financing Needs: 20.6 (2024); 27.3 (2025); 25.0 (2026); 20.0 (2027); 20.2 (2028); 20.5 (2029); 18.8 (2030); 19.6 (2031); 22.2 (2032); 20.8 (2033); n.a.; n.a. - of which: debt service: 21.9 (2024); 26.8 (2025); 25.3 (2026); 21.4 (2027); 21.9 (2028); 22.2 (2029); 20.5 (2030); 21.4 (2031); 23.9 (2032); 22.5 (2033); n.a.; n.a. - Local currency portion of GFN: 20.8 (2024); 19.4 (2025); 23.6 (2026); 20.0 (2027); 20.8 (2028); 21.2 (2029); 19.5 (2030); 20.4 (2031); 22.9 (2032); 21.6 (2033); n.a.; n.a. - Foreign currency portion of GFN: 1.1 (2024); 7.4 (2025); 1.7 (2026); 1.4 (2027); 1.1 (2028); 1.0 (2029); 1.0 (2030); 1.0 (2031); 1.0 (2032); 1.0 (2033); n.a.; n.a. - Memo: - Real GDP growth (percent): 3.9 (2024); 3.8 (2025); 3.7 (2026); 3.1 (2027); 3.0 (2028); 3.0 (2029); 3.0 (2030); 3.0 (2031); 2.8 (2032); 2.8 (2033); n.a.; n.a. - Inflation (GDP deflator; percent): 3.7 (2024); 5.0 (2025); 5.2 (2026); 4.4 (2027); 4.4 (2028); 4.4 (2029); 4.4 (2030); 4.5 (2031); 4.6 (2032); 4.6 (2033); n.a.; n.a. - Nominal GDP growth (percent): 7.5 (2024); 9.0 (2025); 8.8 (2026); 7.5 (2027); 7.6 (2028); 7.6 (2029); 7.6 (2030); 7.6 (2031); 7.6 (2032); 7.6 (2033); n.a.; n.a. - Effective interest rate (percent): 6.8 (2024); 6.0 (2025); 8.5 (2026); 8.9 (2027); 9.0 (2028); 8.9 (2029); 9.1 (2030); 9.2 (2031); 8.9 (2032); 8.8 (2033); n.a.; n.a. - Commentary: Over the medium term, the authorities' fiscal strategy of keeping primary surpluses, coupled with continued economic growth, is anticipated to maintain the public debt-to-GDP ratio on a declining path. ### Medium-term risk assessment (Figure 5) — indices, probabilities, and stress tests - Debt fanchart module: - Fanchart width: 56.1 0.8 (percent of GDP) — as displayed. - Probability of debt non-stabilization (percent): 33.4 0.3 - Terminal debt-to-GDP x: 40.3 0.9 - Debt fanchart index (DFI): 2.0 - Risk signal: 3/Moderate - Gross financing needs (GFN) module: - Average baseline GFN (percent of GDP): 22.0 7.5 - Initial Banks' claims on the gen. govt (pct bank assets): 15.8 5.1 - Chg. In banks' claims in stress (pct banks' assets): 2.7 0.9 - GFN financeability index (GFI): 13.5 - Risk signal: 4/Moderate - Medium-term index and final assessment: - Medium-term index: Value/Weight/Contribution summary provided in figure (Debt fanchart index 2.0; GFN financeability index 13.5). - Final assessment: Prob. of missed crisis, 2025-2030, if stress not predicted: 27.3 pct. - Prob. of false alarms, 2025-2030, if stress predicted: 20.5 pct. - Commentary: The Debt Fanchart and the GFN Financeability Modules suggest moderate levels of risk. Elevated risk could be offset by the sizable domestic institutional investor base, the strong market preference for long-term debt instruments, and the small proportion of foreign currency debt. Contingent liability and banking crisis stress tests are activated: - Contingent liability test: debt and GFN levels maintain downward path over the medium term. - Banking crisis test: debt and GFN levels rise substantially and remain elevated over the medium term. ### Realism of baseline assumptions (Figure 6) — diagnostics and flags - Forecast track record flags optimism for the primary deficit and exchange rate depreciation compared with non-commodity exporters. - Namibia is subject to volatile SACU transfer receipts, unlike comparator economies. - The 3-year adjustment in cyclically adjusted primary balance is below the 75th percentile rank and is well below the maximum 3-year adjustment. - The 3-year debt reduction exceeds the 75th percentile rank, attributed to planned repayment of the Eurobonds in FY25/26. - A significant portion of the repayment is already accumulated in a sinking fund and mitigates the risk to debt reduction. - The projected change in the cyclically adjusted primary balance is negative for FY25/26. Fiscal adjustment is projected to be positive once a large SACU revenue shortfall is taken into account. - Laubach (2009) rule reference: a linear rule assuming bond spreads increase by about 4 bps in response to a 1 ppt increase in the projected debt-to-GDP ratio (as noted in the figure footnote). ### Triggered modules and long-term assessment (Figure 7) - Triggered Modules: Pensions; Health; Long-Term Risk Assessment: Large Amortization. - Under the baseline, the GFN-to-GDP ratio will decline gradually over the long term. - Recent issuances are calibrated to avoid bunching, and the overall debt management strategy is tuned to this objective. - Scenarios shown: Medium-term extrapolation with debt stabilizing primary balance; Large amortizations; Climate change: Adaptation; Climate change: Mitigation; Natural Resources. - Long-run projections compare: Baseline; Baseline with t+5; Baseline with t+5 and DSPB; Historical 10-year average. ### Annex IV — Past Fund Advice: selected recommendations and implementation status - Fiscal Policy - Contain the wage bill by implementing a comprehensive civil service reform, accompanied by a functional review and an early retirement program. - Status: Technical work on a functional review modality is in progress; the civil service reform has yet to be designed and implemented. Public sector wages freeze has been reintroduced in FY25/26 following an easing in the previous year. - Finalize the Public Enterprises Ownership Policy (PAOP) to guide the ongoing SOE reforms. - Status: The new government is re-examining a draft Public Enterprises Ownership Policy. - Mobilize additional revenues, including by strengthening compliance and enforcement. - Status: Enhanced efficiency in collection and improved administration, including compliance, contributed to increases in tax revenues in FY23/24–24/25. - Raise additional revenues from natural resources by allocating fishing license competitively and reviewing the fiscal regime for the mining sector. - Status: Competitive allocation of fishing licenses remains limited. Thin capitalization and unlimited loss carryforward rules were tightened through an amendment of the tax law. - Adopt the PFM Bill (Amended State Finance Act). - Status: Amended State Finance Bill (PFM Bill) is planned to be presented to Parliament in 2025. - Develop a comprehensive fiscal risk management framework. - Status: An inaugural SOE risk report will be published in 2025. The development of a comprehensive risk management framework is at an early stage. - Operationalize the newly established SWF, the Welwitschia Fund (WF). - Status: A law to operationalize rules governing deposits and withdrawals is being drafted and is planned to be presented to Parliament in 2025. - Monetary and Financial Sector Policy - Ensure broad alignment of monetary policy rate with SARB. - Status: The BoN has maintained a negative differential and lowered its policy rate by 100 basis points since mid-2024 to support economic activity and address the challenges of high mortgage rates. - Review daily liquidity management operations and CFMs to ensure an optimal policy transmission mechanism. - Status: The BoN has hired staff to assist with the operationalization of the Liquidity Management and Forecasting Framework. - Monitor financial sector vulnerabilities related to elevated interest rates, broader financial stability, and high banking exposure to NBFI deposits. - Status: The BoN continued to monitor these risks. NPLs provisioning ratio rose to 16.3 in September 2024 from 16.0 in December 2023. - Improve SMEs' access to credit to support private sector-led growth. - Status: By September 2024, the Namibian government disbursed N$ 398.8 million (0.2 percent of estimated GDP in 2024) to 360 eligible businesses under its SME recovery scheme established in 2023. In October 2024, the BoN issued policy changes to provide relief to economic agents in the agriculture sector (moratoriums on loan repayments, loan restructuring, emergency funding). - Continue AML/CFT investigations and strengthen AML/CFT supervision. - Status: Progress in addressing strategic deficiencies; supervision capacity of FIC and other competent authorities strengthened via increased human and financial resources and training. - Product Market and Infrastructure Reforms - Address bottlenecks from public sector wage premium and SOE presence. - Status: Inaugural SOE fiscal risk report improves monitoring; broader civil service and SOE reforms have not progressed. - Reform SOEs providing network services. - Status: Same as above. - Reduce cost of inputs such as energy and data. - Status: No notable progress yet. - Upgrade key infrastructure gaps, including railway network and renewable integration. - Status: Government increased capital spending for the railway network in FY24/25. Trans Namib secured an N$2.6 billion loan. NamPower initiated investment in a hydroelectric dam and finalized a N$1.3 billion loan agreement to fund a 100 MW solar power plant in southern Namibia. A Public Investment Management Assessment was undertaken by the IMF in May 2024. - Labor Market and Regulatory Reforms - Reduce skill mismatches and ease regulatory restrictions to hire skilled foreign workers. - Status: The labor module from the 2023 Population and Housing Census (publicly available January 2025) is expected to help tailor training efforts. - Strengthen PPP framework for mineral discoveries and green hydrogen investments. - Status: Efforts underway to secure offtake and financing for green hydrogen through discussions with the EU and the World Bank Group. Cabinet approved a local content policy bill to foster diversification. - Streamline burdensome regulatory environment and pass the Investment Promotion Bill. - Status: Signing of the Namibia Investment Promotion and Facilitation Bill is still pending. - Strengthen governance and anti-corruption framework; consider subscribing to EITI. - Status: Joining EITI is under consideration. - Climate Mitigation and Food Security - Address food insecurity through structural measures to boost agriculture productivity and resilience. - Status: Drought relief program in FY23/24 and FY24/25 includes food aid and support for farmers. Capital spending for the water sector has been significantly scaled up, with projects financed by external loans. Seed improvement program implemented; productivity improved in large government-owned farms through leasing to the private sector. *Source: IMF staff estimates and projections; Namibia SRDSA chapter content.* ### Annex V. Interest Rate Structure and Monetary Operations ### Annex V. Interest Rate Structure and Monetary Operations ### Monetary framework and exchange rate arrangement - Namibia’s monetary policy is underpinned by the currency peg of the Namibian dollar to the South African Rand. - A statutory requirement forces non-bank financial institutions (NBFIs) to invest 45 percent of assets domestically. ### Policy rate, benchmark lending rates, and margins - The Bank of Namibia (BoN) policy rate is the 7-day repo rate, currently 6.75 percent, set by the Monetary Policy Committee. - The BoN sets a prime rate by adding a premium, currently 375 basis points, above the policy rate; the resulting prime rate is currently 10.5 percent. - South Africa’s prime rate is 11 percent, which is 350 basis points above the SARB repo rate. - Namibian banks have the discretion to apply an additional margin to lending to offset the negative interest rate differential with South Africa. ### Short-term remuneration and liquidity rates - The BoN call rate is currently 7.25 percent, which is 50 basis points above the BoN repo rate. - The call rate remunerates overnight commercial bank balances held in settlement accounts at the BoN to help manage excess liquidity. ### Market liquidity instruments and linkages to SARB - The BoN issues 7, 14, and 28-day bills on a weekly basis to manage liquidity. - BoN bill pricing is linked to SARB rates and specifically based on SARB’s Corporations for Public Deposits (CPDs) rates, which tend to be more attractive and help retain liquidity domestically even when there is a negative differential between SARB and BoN policy rates. ### Structural market constraints and asset substitutability - A limited set of instruments constrains asset substitutability in Namibia; market participants predominantly invest in Namibian government securities. - Banks prefer treasury bills for liquidity management because they are accepted as collateral for BoN operations. - NBFIs, including pension funds, prefer government bonds and tend to hold them to maturity to match long-term liabilities. - The secondary market for government securities is illiquid, hindering easy transitions between Namibian and South African instruments and restricting capital flows to South Africa. - There have been instances where yields on Namibian government securities exceeded South African yields, even when a negative interest rate differential existed between BoN and SARB policy rates. ### Regulatory constraints limiting capital outflows - Despite higher returns on assets in South Africa, Namibian banks face regulatory restrictions on investments in South Africa and must maintain domestic liquidity, which helps curb excessive capital outflows. *Source: Annex V. Interest Rate Structure and Monetary Operations* ### Annex VIII. Impact of Drought and Government Policy Response ### Annex VIII. Impact of Drought and Government Policy Response ### Impact on food security, water, and energy - Agriculture supports 70 percent of Namibia’s population; most impacts concentrated in rural areas, with water supply and food security issues also affecting urban areas. - Cereal production fell by 53 percent, with a 68-percent drop in the commercial farming sector. - 40 percent of Namibians faced acute food insecurity. - 84 percent of the country’s food reserves were depleted as of September 2024. - Urban water accessibility worsened: dam levels down by 70 percent and reduced water levels in the Kunene River impacting domestic use and agriculture. - The drought curtailed output at the Ruacana hydropower plant, which accounts for over 50 percent of the country’s generation capacity. ### Social and gender impacts - The drought increased risks for women, who travel longer distances for water and food, leading to a rise in gender-based violence; special provisions are being made to support them. ### Government fiscal and programmatic response - The government allocated 0.6 percent of GDP in FY24/25 to the disaster relief fund (in addition to 0.3 percent of GDP in the previous fiscal year, partly carried over to FY24/25) to finance the drought relief program. - The drought relief program targets over half the country and provides: - food items and food vouchers, - agricultural supplies, - livestock support, - improved water access. ### External and partner support - The UN (including WFP) and several countries supplemented the government’s response. ### Macro-fiscal context and authorities’ outlook (selected projections and policy stance) - Real GDP growth slowed to 3.7 percent in 2024 due to weak global diamond demand and a drought-induced contraction in agriculture. - Growth projections: 3.8 percent in 2025 and 4.0 percent in 2026, supported by agriculture recovery following above average rainfall, private consumption, hydrocarbons drilling and exploration, and an uptick in uranium exports. - Inflation has eased below the central bank's target range (3–6 percent). - External current account deficit expected to decrease to 14.2 percent of GDP in 2025, down from 15.3 percent in 2024; financing expected largely from FDI and debt inflows. - Fiscal deficit projected to widen from 3.9 percent of GDP in FY24/25 to 4.6 percent of GDP in FY25/26. - Total revenue projected to grow steadily over the MTEF period, driven by non-mining tax revenue, individual income tax, and VAT; FY25/26 revenues affected by lower diamond receipts and a sharp decrease in SACU revenue. - Domestic market has constituted over 80 percent of total financing in recent years; domestic financing projected to remain strong going forward. - Central government debt as a percentage of GDP expected to improve from 66.0 percent in FY24/25 to 62.0 percent in FY25/26 and average 61.8 percent over the MTEF period. - Government preparations to meet Eurobond redemption obligation of USD 750 million due in October 2025 include setting aside funds from SACU receipts and planning further contributions from SACU receipts and the domestic market. *Source: Annex VIII. Impact of Drought and Government Policy Response — 1namea2025001-print-pdf* ### 10. To enhance economic growth and regional competitiveness, our authorities are ### To enhance economic growth and regional competitiveness, our authorities are committed to comprehensive tax reforms. ### Tax reforms - Reduce the non-mining company tax rate from 30 percent to 28 percent starting April 1, 2026. - Introduce a 10 percent dividend tax with exemptions for government, pension, and medical aid funds. - Enhance anti-avoidance measures to regulate hybrid equity instruments. - Support mining investments by allowing deductions for rehabilitation costs. - Review tax brackets for inflation creep. - Increase the retirement commutation threshold from N$50,000 to N$375,000. - Limit housing fringe benefit tax to N$400,000. - Apply VAT to imported digital services by non-resident suppliers. - Review import VAT exemptions to support green industrialization. - VAT zero rating on government-acquired commercial properties to improve tax administration. - Introduce an annual 10 percent improvement allowance on building costs to stimulate construction and support net zero carbon emissions reduction. ### Monetary and financial sector policies - Continue commitment to controlling inflation and enhancing foreign reserves through deliberate monetary policy actions. - Maintain the pegged-exchange rate regime as appropriate. - Inflation decelerating below the central bank’s target range and projected to stabilize around 4 percent in 2025, barring external price fluctuations. - Between July 2024 and February 2025, the Bank of Namibia (BoN) cut its policy rate by 100 basis points, maintaining it at 6.75 percent as of April 202. - Policy approach to bolster domestic economic activity amid global policy uncertainties and preserve the fixed exchange rate between the Namibia Dollar and the South African Rand. - By the end of December 2024, the Bank's foreign reserves saw an 18.4 percent increase from the previous year, driven mainly by foreign government borrowing and higher SACU receipts. - Reserves were sufficient to cover 4.2 months of imports, an improvement from 3.9 months the previous year. - Reserves are expected to cover 3.4 months of imports by the end of 2025. ### Banking sector and NBFI sector developments - Banking sector in Namibia remained well-capitalized, profitable, and liquid in 2024. - Improvements in asset quality driven by an increase in short-term negotiable securities and net loans. - Profitability bolstered by higher net income; liquid asset holdings sufficient to meet near-term obligations. - Stress tests indicate the sector's ability to absorb shocks. - Non-Bank Financial Institutions (NBFI) sector assets increased by 14.3 percent in 2024, supported by favourable financial market conditions and declining interest rates. - Authorities note interconnected risks such as geopolitical tensions and demographic shifts but are confident the NBFI sector will maintain its resilience in 2025. ### Financial stability and macroprudential measures - Bank of Namibia interventions: - Established a regulatory framework for microfinance banks. - Implemented drought relief measures. - Advanced preparations for the countercyclical capital buffer. - Approved the growth-at-risk model to enhance macroprudential surveillance. - Authorities committed to proactive regulatory measures to ensure sector resilience and stability. - Recognized vulnerabilities: global uncertainties and intensifying cyber-related risks. - Commitment to proactive measures and vigilant oversight to ensure the financial sector supports the real economy. ### Growth and climate resilience reforms - Prioritize private sector development, infrastructure investment, and regulatory improvements to stimulate job creation. - Focus on creating an enabling environment for business and investment, particularly in emerging sectors such as oil and gas, while addressing skill gaps and infrastructure needs. - Complementary reforms target social protection, youth empowerment, and food security. - Recurring climate shocks and limited electricity generation—exacerbated by low water inflows at the Ruacana hydro plant—pose risks to economic output and energy reliability. - New administration agenda aligned with the 6th National Development Plan and the SWAPO Manifesto Implementation Plan emphasizing: - Food and water security. - Sustainable energy development. - Institutional efficiency. - Recent structural changes, including ministry mergers, aim to streamline governance and reinforce macroeconomic and climate resilience reforms. ### Structural reforms - Comprehensive structural reform agenda to enhance economic resilience and inclusion. - Measures to respond to population growth and unemployment: - Expand access to land and housing. - Improve labour market alignment. - Reduce regulatory barriers. - Key initiatives include visa process simplification, land use liberalization, and targeted support for youth employment and skills development. - Intensify efforts to strengthen social protection and address skills mismatches in the labour market. - Continued budget allocations supporting youth-focused programs for skills development and capacity building. - Implement active labour market policies to reduce unemployment and inequality. - Enhance the macroprudential policy toolkit to improve monitoring of macro-financial risks and ensure economic stability. - Explore solutions for Social Safety Nets, address procurement bottlenecks, and enhance oversight of government schemes to improve public service delivery and resource management. - Commit to comprehensive civil service reform accompanied by digitalization to facilitate fiscal consolidation and enhance service delivery. - Raise efficiency of public investment and focus it on addressing key infrastructure gaps (energy, transport, water) to improve growth prospects and foster resilience and job creation. ### AML/CFT progress and FATF engagement - Significant progress on FATF grey listing during 2024. - Timeline and actions: - Adoption of the national action plan in February 2024. - Voluntary progress report submitted in July 2024. - Compulsory report submitted in November 2024. - Face-to-face review in January 2025. - Substantial improvements in Namibia’s AML/CFT regime, including full technical compliance on nearly all recommendations. - Enhanced risk-based supervision, increased filing of beneficial ownership information, and improved inter-agency cooperation. - Established a national focal committee to ensure sustainability; investments in staffing, training, and technology. - Internal target set to exit increased monitoring by FATF within 19 months from July 2024; authorities judge the probability of missing this target to be low. ### Conclusion - Authorities remain committed to inclusive growth and acknowledge the IMF’s continued partnership. - Continued focus on improving the business environment, increasing productivity, and strengthening social safety nets while addressing existing imbalances to foster a resilient and inclusive economy for all Namibians. *Source: 1namea2025001-print-pdf - 10. To enhance economic growth and regional competitiveness, our authorities are* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1namea2025001-print-pdf.pdf_