## Navigating Weather Shocks: Challenges and Investing to Strengthen Agriculture Resilience in Namibia

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**Canonical URL:** [Navigating Weather Shocks: Challenges and Investing to Strengthen Agriculture Resilience in Namibia](https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025091.pdf)

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### A. Introduction — context and immediate impacts
- Namibia is highly arid: "92 percent of Namibia's land classified as arid."
- Water stress ranking: "21st most water stressed countries globally."
- Agriculture dependence and exposure:
  - "11 percent of Namibian households depend on subsistence or commercial farming as the main source of livelihood."
  - Agriculture supports "70 percent of the Namibian population directly or indirectly (FAO, Namibia)."
- Electricity and hydropower stresses:
  - Imports averaged "67 percent of total electricity demand in the second half of the year" (2020–24).
  - Imports averaged "54 percent in the first half of the year."
  - "Ruacana Hydro Power Station accounted for 79 percent of locally generated electricity in August 2024" in a stressed period.
- Recent drought impacts (2023–24):
  - Crop farming declines: "down by 31.7 percent and 6.6 percent in 2023 and 2024, respectively."
  - Food insecurity and reserves: "approximately 40 percent of the population already facing high levels of acute food insecurity and 84 percent of food reserves exhausted as of September 2024."
  - Dam water levels declined by "70 percent."
- Fiscal response: government made "a cumulative budgetary allocation of 0.9 percent of GDP in FY23/24 and FY24/25" for drought relief.

### B. Namibia’s vulnerability to severe weather and climate change
- Historical and projected temperature changes:
  - "The average annual temperature in Namibia has increased by 1.2°C."
  - Strong confidence in "an increase of Namibia's average annual temperatures by at least 2 ̊C by 2050."
  - Under a high-emissions scenario, temperature rise "could reach 4 ̊C."
  - Under a low-emissions scenario, temperature rise "suggests a range of 1.1–3.1 ̊C."
  - "15 to 40 more days each year expected to exceed 35°C across the country."
- Rainfall and drought trends:
  - Staff has "moderate confidence that Namibia will become generally drier and average rainfall may fall by 12 percent by 2050."
  - "More frequent droughts and a steady decline in annual rainfall" observed.
- Vulnerability indices and risk scores:
  - ND-GAIN Index rank: "109th out of 187 countries."
  - Children’s Climate Risk Index rank: "77th out of 163 nations" (medium-high risk).
  - INFORM Climate Change Risk Index score: "3.2."
- Socio-economic damages from past events:
  - Droughts 2013–2016 affected "approximately 450,000 people."
  - 1991 drought impacted "over 550,000 people" and caused damages worth "4 percent of GDP."
  - Flooding events affect "roughly 70,000 people each year"; 2011 flood impacted "nearly 500,000 people" with "65 fatalities."
  - "6.1 percent of total deaths between October 2022 and September 2023 were caused by natural disasters."
- Water resource pressures:
  - Traditional water shares: groundwater "45 percent", perennial border rivers "33 percent", impoundments on ephemeral river "22 percent."
  - Water stress projected "to be extremely high for the next 30 years."
  - Erratic floods can lead to damages worth "0.4 percent of GDP by 2030."

### C. Projected economic and sectoral impacts
- Agriculture and livestock:
  - Model-based projections: traditional agriculture production may drop "by 40 percent in moderate climate scenario to 80 percent in an extreme climate scenario" by 2050.
  - Livestock carrying capacity could fall "by 20–50 percent by 2050."
- Macro growth impacts:
  - A VAR analysis indicates "GDP growth is estimated to have been lowered by 0.7 percentage points in the year following a drought shock."
- Energy sector:
  - Rising temperatures and urbanization are expected to increase electricity demand while reduced hydropower supply may constrain generation and influence reliance on imports.

### D. Policy responses and current public investment posture
- Ongoing and planned actions:
  - Government developing a "National Resilience Building Strategy."
  - Preparation of a "Green Climate Fund project" to strengthen climate information and early warning systems.
  - Scaling up capital expenditure on water infrastructure at "the annual cost of 0.3 percent of GDP on average over the Medium-Term Expenditure Framework for FY24/25–26/27."
- Implementation challenges for water management:
  - Water Resources Management Act of 2013 and 2023 Water Resources Management Regulations exist, but effective implementation hindered by "institutional capacity and financial constraints, administrative burdens for rural users, high compliance costs, inadequate data and monitoring infrastructure, and limited public awareness."
- Gaps in adaptation capacity:
  - Efficiency of irrigated agriculture water use in Namibia is "lower than the Sub-Saharan Africa region."
  - Disaster preparedness "is well below those of comparator country groups."

### E. Investment strategy analysis — model setup and calibration
- Model framework:
  - Climate Adaptation and Food Security model with agricultural and non-agriculture sectors, international trade, and two types of public capital stocks (development capital and adaptation capital).
  - Distinguishes development capital (enhances production) and adaptation capital (mitigates climate damages and costs more to build).
- Key calibration points and baseline parameters:
  - Current public spending on agriculture: "0.7 percent of GDP."
  - Share of agricultural consumption from imports: "39 percent."
  - Climate productivity loss calibration uses "3.3 ̊C warming" leading to "agricultural productivity loss by 27 percent in Namibia without adaptation" (Cline, 2007 country-specific central projection).
  - Adaptation investment efficiency baseline: "adaptation investment rate of 0.01 percent of GDP per year reduces climate change-induced damage by 30 percent" (based on SSA average in Agrawala, 2010).
  - Alternative (lower efficiency) assumption: "0.1 percent of GDP adaptation investment per year is needed to achieve the same reduction in damage" (ten-fold lower efficiency scenario).

### F. Model findings on investment needs and optimal allocation
- Development investment requirements:
  - "If no financing constraint is imposed, the model estimates that 2.4–2.5 percent of GDP investment in development capital per year through 2050 will mitigate a substantial part of climate change damages."
- Tradeoffs and fiscal constraints:
  - Analysis considers effects of allocating resources between development investment and adaptation investment in light of "limited fiscal space."
- Strategic implications:
  - Fully offsetting climate-induced damages requires substantial scaling-up of development investment.
  - Adaptation investment efficiency materially affects the optimal mix of investments; lower efficiency increases required spending or shifts emphasis toward development capital.

### G. Key policy recommendations (chapter summary)
- Scale up public development investment aimed at raising productivity in the agricultural sector.
- Increase public adaptation investment to build climate resilience of the agricultural sector, including water infrastructure and climate-resilient technologies.
- Improve public investment management to ensure effective implementation and strengthen institutional capacity for water resource management.
- Balance ex-post relief spending with strengthened ex-ante resilience-building to use fiscal resources more efficiently.

### Section 2 — Simulation design and key scenario
- Two public investment policy options simulated under a binding financing constraint of "1.5 percent of GDP":
  - (1) only standard development capital; and
  - (2) a combination of both development and adaptation capital.
- Endogenous variables (output, investment, exports, and imports) are presented as percentage deviations from a counterfactual of “no climate change” baseline.

### Main simulation findings under the binding financing constraint
- Underinvesting in adaptation requires a higher level of total development investment to contain climate-related shocks.
- If investment is made only for development capital:
  - Agricultural output is projected to be lower by "ten percent relative to the no-climate change counterfactual in 2050."
  - Total outputs are projected to be lower by "seven percent relative to the no-climate change counterfactual in 2050."
  - Agricultural net imports are projected to increase by "45 percent relative to the baseline."
  - Exports are projected to be "16 percent lower relative to the baseline."
- Reallocating a modest amount of public development investment to adaptation while keeping total public investment at "1.5 percent of GDP":
  - Limits total output loss to within "0.5 percent by 2050 compared with the no-climate change counterfactual."
  - Substantially improves other key variables relative to the development-only scenario, reflecting the damage-mitigating effect of adaptation investment.

### Cost-effective mix and sensitivity to adaptation efficiency assumptions
- Default optimal split under the binding constraint:
  - Adaptation investment of "0.1 percent of GDP" and development investment of "1.4 percent of GDP."
- Alternative (lower-efficiency) assumption:
  - Optimal mix tilts toward adaptation of "0.3 percent of GDP" (with an output loss of "3.1 percent by 2050").
- Interpretation and constraints:
  - Relatively low optimal level of adaptation investment reflects high food import dependency and a larger productivity gap between agricultural and non-agricultural sectors.
  - Continued high reliance on food imports exposes the economy to regional and global shocks and limits trade and the scope for food imports if other countries prioritize domestic food consumption.
  - If trade disruptions occur, the country would be forced to increase investment to raise agriculture productivity.
  - Closing the productivity gap implicit in the model might not materialize given the prevalence of subsistence agriculture.

### Conclusions and policy recommendations (Section 2)
- Plan and implement a sound and fiscally feasible adaptation investment strategy to boost agriculture resilience.
- Recognize that climate-related shocks will likely cause more frequent or severe economic damage, increasing fiscal costs to mitigate associated damage.
- Authorities are appropriately aiming to increase public investment to build climate resilience (FY 2024/25 Mid-Year Budget Review Statement).
- Model-based analysis suggests:
  - Investment needs for public development capital to offset climate-related production loss in the agricultural sector could be large.
  - A cost-effective combination of development and adaptation investment could reduce such loss at relatively modest costs.
- To realize investment benefits:
  - Improve public investment management, given scope for improvement highlighted in Public Investment Management Assessment (PIMA) and Climate-PIMA undertaken in 2024.
  - Reduce reliance on food imports by implementing measures to raise agriculture productivity (as recommended by GIZ Sector Brief: Namibia 2022 and A Growth Diagnostic of Namibia, 2022).
- Continue complementary efforts to strengthen adaptation, leveraging the National Resilience Building Strategy:
  - Encourage greater adoption of drought resilient crops and livestock and mixed farming.
  - Improve water management systems.
  - Strengthen early warning systems.
  - Expand access to insurance mechanisms to distribute risks and cushion financial shocks from climate-induced natural disasters.
  - Develop and adopt crop and animal insurance and other insurance products to mitigate shocks against natural disasters.

*Source: IMF Selected Issues Paper SIP/2025/091, completed May 28, 2025. IMF staff.*

### Section 1

### Navigating Weather Shocks: Challenges and Investing to Strengthen Agriculture Resilience in Namibia

### A. Introduction — context and immediate impacts
- Namibia is highly arid: "92 percent of Namibia's land classified as arid."
- Water stress ranking: "21st most water stressed countries globally."
- Agriculture dependence and exposure:
  - "11 percent of Namibian households depend on subsistence or commercial farming as the main source of livelihood."
  - Agriculture supports "70 percent of the Namibian population directly or indirectly (FAO, Namibia)."
- Electricity and hydropower stresses:
  - Imports averaged "67 percent of total electricity demand in the second half of the year" (2020–24).
  - Imports averaged "54 percent in the first half of the year."
  - "Ruacana Hydro Power Station accounted for 79 percent of locally generated electricity in August 2024" in a stressed period.
- Recent drought impacts (2023–24):
  - Crop farming declines: "down by 31.7 percent and 6.6 percent in 2023 and 2024, respectively."
  - Food insecurity and reserves: "approximately 40 percent of the population already facing high levels of acute food insecurity and 84 percent of food reserves exhausted as of September 2024."
  - Dam water levels declined by "70 percent."
- Fiscal response: government made "a cumulative budgetary allocation of 0.9 percent of GDP in FY23/24 and FY24/25" for drought relief.

### B. Namibia’s vulnerability to severe weather and climate change
- Historical and projected temperature changes:
  - "The average annual temperature in Namibia has increased by 1.2°C."
  - Strong confidence in "an increase of Namibia's average annual temperatures by at least 2 ̊C by 2050."
  - Under a high-emissions scenario, temperature rise "could reach 4 ̊C."
  - Under a low-emissions scenario, temperature rise "suggests a range of 1.1–3.1 ̊C."
  - "15 to 40 more days each year expected to exceed 35°C across the country."
- Rainfall and drought trends:
  - Staff has "moderate confidence that Namibia will become generally drier and average rainfall may fall by 12 percent by 2050."
  - "More frequent droughts and a steady decline in annual rainfall" observed.
- Vulnerability indices and risk scores:
  - ND-GAIN Index rank: "109th out of 187 countries."
  - Children’s Climate Risk Index rank: "77th out of 163 nations" (medium-high risk).
  - INFORM Climate Change Risk Index score: "3.2."
- Socio-economic damages from past events:
  - Droughts 2013–2016 affected "approximately 450,000 people."
  - 1991 drought impacted "over 550,000 people" and caused damages worth "4 percent of GDP."
  - Flooding events affect "roughly 70,000 people each year"; 2011 flood impacted "nearly 500,000 people" with "65 fatalities."
  - "6.1 percent of total deaths between October 2022 and September 2023 were caused by natural disasters."
- Water resource pressures:
  - Traditional water shares: groundwater "45 percent", perennial border rivers "33 percent", impoundments on ephemeral river "22 percent."
  - Water stress projected "to be extremely high for the next 30 years."
  - Erratic floods can lead to damages worth "0.4 percent of GDP by 2030."

### C. Projected economic and sectoral impacts
- Agriculture and livestock:
  - Model-based projections: traditional agriculture production may drop "by 40 percent in moderate climate scenario to 80 percent in an extreme climate scenario" by 2050.
  - Livestock carrying capacity could fall "by 20–50 percent by 2050."
- Macro growth impacts:
  - A VAR analysis indicates "GDP growth is estimated to have been lowered by 0.7 percentage points in the year following a drought shock."
- Energy sector:
  - Rising temperatures and urbanization are expected to increase electricity demand while reduced hydropower supply may constrain generation and influence reliance on imports.

### D. Policy responses and current public investment posture
- Ongoing and planned actions:
  - Government developing a "National Resilience Building Strategy."
  - Preparation of a "Green Climate Fund project" to strengthen climate information and early warning systems.
  - Scaling up capital expenditure on water infrastructure at "the annual cost of 0.3 percent of GDP on average over the Medium-Term Expenditure Framework for FY24/25–26/27."
- Implementation challenges for water management:
  - Water Resources Management Act of 2013 and 2023 Water Resources Management Regulations exist, but effective implementation hindered by "institutional capacity and financial constraints, administrative burdens for rural users, high compliance costs, inadequate data and monitoring infrastructure, and limited public awareness."
- Gaps in adaptation capacity:
  - Efficiency of irrigated agriculture water use in Namibia is "lower than the Sub-Saharan Africa region."
  - Disaster preparedness "is well below those of comparator country groups."

### E. Investment strategy analysis — model setup and calibration
- Model framework:
  - Uses a Climate Adaptation and Food Security model with agricultural and non-agriculture sectors, international trade, and two types of public capital stocks (development capital and adaptation capital).
  - Distinguishes development capital (enhances production) and adaptation capital (mitigates climate damages and costs more to build).
- Key calibration points and baseline parameters:
  - Current public spending on agriculture: "0.7 percent of GDP."
  - Share of agricultural consumption from imports: "39 percent."
  - Climate productivity loss calibration uses "3.3 ̊C warming" leading to "agricultural productivity loss by 27 percent in Namibia without adaptation" (Cline, 2007 country-specific central projection).
  - Adaptation investment efficiency baseline: "adaptation investment rate of 0.01 percent of GDP per year reduces climate change-induced damage by 30 percent" (based on SSA average in Agrawala, 2010).
  - Alternative (lower efficiency) assumption: "0.1 percent of GDP adaptation investment per year is needed to achieve the same reduction in damage" (ten-fold lower efficiency scenario).

### F. Model findings on investment needs and optimal allocation
- Development investment requirements:
  - "If no financing constraint is imposed, the model estimates that 2.4–2.5 percent of GDP investment in development capital per year through 2050 will mitigate a substantial part of climate change damages."
- Tradeoffs and fiscal constraints:
  - Analysis considers effects of allocating resources between development investment and adaptation investment in light of "limited fiscal space."
- Strategic implications highlighted by the analysis:
  - Fully offsetting climate-induced damages requires substantial scaling-up of development investment.
  - Adaptation investment efficiency materially affects the optimal mix of investments; lower efficiency increases required spending or shifts emphasis toward development capital.

### G. Key policy recommendations (as reflected in the chapter)
- Scale up public development investment aimed at raising productivity in the agricultural sector.
- Increase public adaptation investment to build climate resilience of the agricultural sector, including water infrastructure and climate-resilient technologies.
- Improve public investment management to ensure effective implementation and strengthen institutional capacity for water resource management.
- Balance ex-post relief spending with strengthened ex-ante resilience-building to use fiscal resources more efficiently.

*Source: IMF Selected Issues Paper SIP/2025/091, completed May 28, 2025.*

### Section 2

### Section 2

### Simulation design and key scenario
- Two public investment policy options were simulated under a binding financing constraint of 1.5 percent of GDP:
  - (1) only standard development capital; and
  - (2) a combination of both development and adaptation capital.
- Resulting endogenous variables (output, investment, exports, and imports) are presented as percentage deviations from a counterfactual of “no climate change” baseline (Figure 10).

### Main simulation findings under the binding financing constraint
- Underinvesting in adaptation requires a higher level of total development investment to contain climate-related shocks.
- If investment is made only for development capital:
  - Agricultural output is projected to be lower by ten percent relative to the no-climate change counterfactual in 2050 (dashed red lines in Figure 10).
  - Total outputs are projected to be lower by seven percent relative to the no-climate change counterfactual in 2050.
  - Agricultural net imports are projected to increase by 45 percent relative to the baseline.
  - Exports are projected to be 16 percent lower relative to the baseline.
- Reallocating a modest amount of public development investment to adaptation while keeping total public investment at 1.5 percent of GDP:
  - Limits total output loss to within 0.5 percent by 2050 compared with the no-climate change counterfactual (blue solid lines in Figure 10).
  - Substantially improves other key variables relative to the development-only scenario, reflecting the damage-mitigating effect of adaptation investment.

### Cost-effective mix and sensitivity to adaptation efficiency assumptions
- The model suggests a cost-effective mix of development and adaptation investment for Namibia:
  - Default optimal split: adaptation investment of 0.1 percent of GDP and development investment of 1.4 percent of GDP.
  - Alternative assumption on efficiency of adaptation investment tilts the optimal mix toward a slightly larger allocation to adaptation: adaptation investment of 0.3 percent of GDP (with an output loss of 3.1 percent by 2050) (Figure 11).
- Interpretation and constraints:
  - The relatively low optimal level of adaptation investment reflects high food import dependency and a significantly larger productivity gap between agricultural and non-agricultural sectors (therefore greater room to close it) compared with those in similar income-level countries.
  - Continued high reliance on food imports exposes the economy to regional and global shocks, including impacts of climate change and trade fragmentations, which limits trade and the scope for food imports as other countries prioritize meeting their own food consumption needs.
  - If trade disruptions occur, the country would be forced to increase investment to raise agriculture productivity.
  - Closing the productivity gap implicit in the model might not materialize given the prevalence of subsistence agriculture.

### Conclusions and policy recommendations
- It is crucial to plan and implement a sound and fiscally feasible adaptation investment strategy to boost the resilience of agriculture.
- Climate-related shocks will likely cause more frequent or severe economic damage, leading to increased fiscal costs to mitigate associated damage, as evident from the experience of the ongoing drought.
- Authorities are appropriately aiming to increase public investment to build climate resilience (FY 2024/25 Mid-Year Budget Review Statement).
- Model-based analysis suggests:
  - Investment needs for public development capital to offset climate-related production loss in the agricultural sector could be large.
  - A cost-effective combination of development and adaptation investment could reduce such loss at relatively modest costs.
- To realize benefits of investment:
  - Improve public investment management, given significant scope for improvement highlighted in Public Investment Management Assessment (PIMA) and Climate-PIMA undertaken in 2024.
  - Reduce reliance on food imports by implementing measures to raise agriculture productivity (as recommended by GIZ Sector Brief: Namibia 2022 and A Growth Diagnostic of Namibia, 2022).
- Continue complementary efforts to strengthen adaptation, leveraging the ongoing development of the National Resilience Building Strategy to improve practices that increase agriculture productivity and food security.
  - Potential measures include:
    - Encouraging greater adoption of drought resilient crops and livestock and mixed farming.
    - Improving water management systems.
    - Strengthening early warning systems.
    - Expanding access to insurance mechanisms to distribute risks and cushion financial shocks from climate-induced natural disasters.
  - Development and adoption of crop and animal insurance could be encouraged.
  - Other insurance products could mitigate shocks against natural disasters.
- Together, these efforts help alleviate the financial burden of disasters, enabling affected populations to recover more efficiently and sustainably.

*Source: IMF staff.*

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_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025091.pdf_