## _cr0882

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### I. Introduction — framing the selected issues papers
- Namibia’s economic position strengthened over the past year due to a substantial terms of trade improvement and large receipts from the Southern African Customs Union (SACU), contributing to significant external current account and fiscal surpluses.
- Macroeconomic challenge: promote stronger and more broad-based growth while preserving macroeconomic stability in the context of possible declines in the terms of trade and SACU receipts.
- Purpose: complement the staff report for the 2007 Article IV consultation with additional analytical coverage in: external current account developments (Chapter II); capital outflow regulation and domestic investment (Chapter III); management of non-renewable natural resources (Chapter IV); and unemployment challenges and policy responses (Chapter V).

### II. Current account developments — findings and framework
- Empirical observations:
  - Namibia experienced uninterrupted current account surpluses since independence in 1990.
  - Estimated surplus surged to more than 15 percent of GDP in 2006.
  - After averaging 3 percent of GDP during 1990–2002, the surplus rose to an average of 7 percent in 2003–05, and then to an estimated average of 17 percent of GDP in 2006–07 (2007 estimate projected using first-half data).
  - In 2006, Namibia ranked in the top 10 percent of lower middle-income countries (LMICs) by current account performance; many strong performers were petroleum or mineral exporters.
- Assessment framework:
  - Underlying current account excludes temporary factors (short-lived fiscal shifts, temporary terms of trade shocks, lagged exchange rate impacts) and is derived from the medium-term macroeconomic framework.
  - External stability assessment requires: understanding observed current account; projecting medium-term evolution; estimating equilibrium current account.
  - Approaches: macroeconomic balance (MB), external stability (ES), equilibrium real exchange rate (ERER). This paper focuses on MB and ES.

### III. Savings–investment trends — identity, decomposition, and projections
- Accounting identity: CAB = SAV – INV = (SAV_pub – INV_pub) + (SAV_priv – INV_priv).
- High-level drivers:
  - Both increased public and private savings contributed to the increased current account surplus.
  - Initial strengthening from 2003 largely driven by private sector savings; further increase in 2006–07 roughly 50-50 public and private.
- Tabulated change contributions (changes from 1990–2002, in percent of GDP):
  - 2003 to 2005: Public savings -0.3; Public investment 7.1; Public finances 1/ -0.6; Private savings -0.3; Private investment 0.2; Private finances 1/ 7.4; External current account 9.9.
  - 2006 to 2007: Public savings 13.4; Public investment 6.4; Public finances 1/ 6.7; Private savings 3.5; Private investment 6.7; Private finances 1/ 3.7; External current account 14.1.
  - Note: 1/ Net acquisition of financial assets, or savings minus capital investments.
- Public sector specifics:
  - Public saving averaged 1.5 percent of GDP during 1990–2005, rose to nearly 8 percent of GDP in fiscal year 2006/07, and a further increase to 9 percent is projected for 2007/08.
  - With broadly stable public investment relative to GDP, fiscal tightening contributed substantially to the strong external current account in 2006–07.
  - Fiscal composition (relative to 1990–2005 average, percent of GDP):
    - 2003/04–2005/06: Fiscal savings -0.3; Lower current spending 0.6; Higher SACU receipts 0.5; Higher mining taxation -0.9; Higher other rev. & grants -0.9.
    - 2006/07–2007/08: Fiscal savings 7.1; Lower current spending 3.2; Higher SACU receipts 4.8; Higher mining taxation 0.0; Higher other rev. & grants -0.5.
  - Drivers: budgetary expenditure compression (about 3 percentage points of GDP) and strong SACU receipts (about 4–5 percentage points).
  - Medium-term projection: fiscal stance projected to ease as SACU receipts moderate and public investment increases; projected shortfall of public savings relative to investments over the medium term is 2-2½ percent of GDP.
- Private sector specifics:
  - Private savings increased around 2003: compared to 1990–2002, savings in 2003–05 were up 8 percentage points of GDP, only partly offset by higher investment.
  - Accumulation of private net foreign assets associated with these savings is less well understood.

### IV. Regression analysis and savings projections
- Factors potentially influencing private savings identified:
  - Per capita real GDP growth; Real interest rates; CPI inflation; Mineral exports (percent of GDP); Contractual savings; Real effective exchange rate.
- Regression (1990–2006) results:
  - Statistically significant explanatory variables: CPI inflation and real interest rates (but real interest rate lost significance when inflation included).
  - Contractual savings not assessed due to data absence.
  - No significant role for per capita real GDP growth, mineral exports (percent of GDP), or the real effective exchange rate.
  - Fitted equation: SAVpriv = 35.41 - 1.14 INFL (t-statistics (14.3) (4.3)); Adjusted R-squared = 0.52.
- Interpretation and anomalies:
  - Strong inflation–savings relationship may proxy for other influences; economic basis unclear.
  - Rise in private saving in 2003 associated with a sharp fall in real consumption expenditures and a surge in private investment in 2003; possible underestimation of imports starting around 2003 could contribute to the surge in recorded private saving.
  - Estimated equation underpredicts private savings in 2006; overperformance projected to persist through 2007 and may reflect increased mining incomes (mineral exports rose by 4 percent of GDP in 2006).
- Projections and scenarios:
  - Savings projected to converge toward levels predicted by the inflation model, subject to uncertainty.
  - Investment-GDP ratio: best modeled by a time trend; medium-term framework assumes further increase in investment-GDP ratio but more gradual than the preceding decade.
  - Projected underlying external current account surplus of 5 percent of GDP in 2012, driven by: easing fiscal stance as public savings reverse; decline in private savings from 2006 levels toward inflation-model level; modest rise in private investment.

### V. Net Foreign Assets (NFA) — history, assumptions, and projections
- Historical NFA:
  - Between 1998 and 2004, Namibia’s NFA position rose by an estimated 12 percentage points of GDP (net liability position declined from 19 percent of GDP to 7 percent).
  - Based on expanded IIP survey, Namibia had an NFA surplus of 22 percent of GDP in 2006.
- Key projection assumptions:
  - FDI assumed to change in value by difference between underlying inflation (GDP deflator) and economic depreciation over a 20-year horizon (5 percent per annum).
  - Portfolio holdings split two-thirds equity and one-third fixed-income:
    - Equities assumed to rise in line with nominal GDP in South Africa.
    - Fixed-income earn a nominal interest rate.
    - Reinvested dividends assumed with a 2 percent dividend yield.
  - Alternative pass-through assumptions: historically difference between capital outflows and NFA accumulation estimated about 5 percentage points of GDP per annum; if mismatch reflects incorrect attribution, capital outflow data should be discounted; alternatively pass-through could be closer to one.
- Projected profiles:
  - NFA projected to strengthen further but at a slowing pace.
  - If past trends of less-than-full pass-through continue, the NFA position would stabilize at about 60 percent of GDP.
  - Numerical (lower profile) projection: NFA projected to rise about 50 percentage points of GDP between 2005 and 2012.
    - Of this total: about 11–12 percentage points reflects public sector strengthening (decline in public debt from 30 percent of GDP in 2005/06 to 25 percent over the medium term, and rise in net international reserves from 5 percent of GDP in 2005 to 11–12 percent of GDP from 2007 through 2012).
    - Remaining roughly 38 percent of GDP increase in private sector NFA, partly reflecting contractual savings abroad by pension and life insurance schemes.

### VI. Risks of capital flow reversals and assessment
- Reasons why abrupt capital flow reversals appear unlikely:
  - Portfolio investments abroad equivalent to 66 percent of GDP at end-2006, largely pension and insurance fund investments constrained by regulations; major reversal toward Namibia unlikely unless investment conditions deteriorate markedly in South Africa.
  - Direct investments are a net foreign liability estimated at 41 percent of GDP at end-2006; abrupt reversal via divestments unlikely given profitability.
  - Other investments (loans and bank sector net positions) modest: under 3 percent of GDP for private sector and parastatals, and 6 percent of GDP for government; roll-over risk limited.
  - CMA membership and close interest rate alignment with South Africa reduce exchange rate/external shocks.

### VII. Pension and insurance sector, capital outflows, and domestic investment requirements
- Savings and investment magnitudes:
  - 2004–2006 gross national savings averaged 37 percent of GDP; domestic investments averaged 27 percent of GDP.
  - Excess savings were invested abroad, largely by pension and insurance industry.
- Capital outflows and assets:
  - 2003–2005 financial account outflows exceeded US$500 million per annum (approaching 10 percent of GDP); surged to US$1.3 billion in 2006 (19 percent of GDP).
  - Net portfolio outflows averaged 15½ percent of GDP.
  - IIP mid-2007: total gross foreign assets estimated at 105 percent of GDP, with 70 percent portfolio investment; South African assets about 80 percent of total and portfolio investment.
  - Pension and insurance assets: as of March 2004 exceeded 100 percent of GDP; staff estimate N$58 billion (US$ 8.2 billion) in mid-2007 or about 110 percent of GDP.
- Pension fund specifics:
  - Pension fund investments account for about 60 percent of combined pension/insurance total.
  - Pension fund assets under management: N$21 billion (57 percent of GDP) as of March 2004.
  - Pension funds achieved real returns averaging a little over 3 percent between 2001 and 2004.
  - Namibia has more than 500 pension funds; Government Institutions Pension Fund (GIPF) held about 73 percent of industry total.
  - GIPF allocations (March 2005, percent of total assets at book value): Total: Namibia 38.3; South Africa 53.8; Other international 7.9.
  - GIPF end-2006: 46.5 percent of assets in South Africa, 19.0 percent in other foreign countries, 34.5 percent domestically.
  - Private fund managers (early 2002): 48 percent in South Africa, 17 percent other foreign, 35 percent domestically; nearly half of domestic investments were in foreign companies dual-listed on the NSX, leaving true domestic investments under 20 percent of total portfolios.
- Insurance industry:
  - Insurance assets N$14.4 billion (42 percent of GDP) in March 2004; 92 percent held by long-term insurers.
  - Life insurance industry: 16 long-term insurers and 12 short-term insurers; top three companies hold approximately 85 percent of market.

### VIII. Domestic investment regulation proposals, modeled impacts, and risks
- Proposed tightening (preliminary proposals):
  - Institutional investors required to invest a minimum of 5 percent of assets under management in unlisted Namibian firms.
  - Value of dual-listed companies qualifying as domestic reduced from 100 percent to 10 percent phased over five years (example phase-in: Year 1 credit 30 percent; then reduce by 5 percentage points each year to 10 percent in Year 5).
  - Unit trusts to be subject to same domestic investment requirements and lose tax-exempt status.
- Modeling results (Table III.5 assumptions and outputs):
  - Dual-Listed Companies (% of Portfolio) assumed constant at 15.0%.
  - Contribution to Domestic Investment Requirement (DIR) under phased scoring falls: Current 15.0% → Year 1 4.5% → Year 2 3.8% → Year 3 3.0% → Year 4 2.3% → Year 5 1.5%.
  - Asset Shift Need to Meet DIR (percent of portfolio): Current 0.0% → Year 1 10.5% → Year 2 11.3% → Year 3 12.0% → Year 4 12.8% → Year 5 13.5%.
  - Asset Shift Need in N$ Billions: Current $0.0 → Year 1 $7.6 → Year 2 $9.3 → Year 3 $11.4 → Year 4 $13.8 → Year 5 $16.7.
  - Asset Shift Need in percent of GDP: Current 0.0% → Year 1 11.8% → Year 2 12.8% → Year 3 13.9% → Year 4 15.0% → Year 5 16.2%.
  - Investment Requirement in Unlisted Namibian Companies: Current 0% → Years 1–5 5%.
  - New Investment in Unlisted Companies in N$ Billions: Current $1.0 → Year 1 $1.6 → Year 2 $2.4 → Year 3 $3.4 → Year 4 $4.6 → Year 5 $6.2.
  - New Investment in Unlisted Companies in percent of GDP: Current 1.7% → Year 1 2.5% → Year 2 3.3% → Year 3 4.2% → Year 4 5.1% → Year 5 6.0%.
  - Memo: Portfolio Assets (N$ Billion): Current 58.0 → Year 1 64.9 → Year 2 72.7 → Year 3 81.6 → Year 4 91.5 → Year 5 103.0; % of GDP: 111 112 114 116 118 120; GDP (N$ Billion): Current 52.2 → Year 1 58.0 → Year 2 63.8 → Year 3 70.3 → Year 4 77.5 → Year 5 85.8.
- Key modeled implications and risks:
  - If dual-listed companies scored at 10 percent rather than 100 percent, their contribution to the 35 percent domestic rule would fall from around 15 percent to 1½ percent.
  - Fund managers would need to shift at least 13½ percent of portfolios out of foreign capital or dual-listed companies to finance new domestic investments (phased outcome).
  - With total portfolios exceeding 100 percent of GDP, shifts could be significantly more than 10 percent of GDP.
  - If scoring falls from 100 to 30 percent in Year 1, required shift in the first 12 months would equal 10½ percent of total portfolios.
  - Repurposed assets likely allocated to: unlisted companies; listed Namibian equities; government bonds; cash; property.
  - Current unlisted companies account for about 1½ percent of pension fund assets; reaching a 5 percent minimum requires an additional 3½ percent of fund assets.
  - Macro and absorption risks: capital inflows repatriation equivalent to 10½ percent of GDP likely to cause inflationary pressures and real exchange rate appreciation unless phased over many years; institutional capacity limited (only 7 locally-listed firms on NSX; government budget close to balance limits supply of government debt).
  - Historical experiences (DCP, NHI) show weak opportunities, poor management, and large losses in forced domestic investment schemes (GIPF wrote off 84 percent of DCP investments: N$630 million of N$750 million).

### IX. Exchange rate, monetary, and market implications of repatriation
- CMA framework and limits:
  - Free transfers among CMA members; alignment with South Africa’s exchange control provisions for flows outside CMA.
  - Individual limit of R2 million for investment outside CMA.
  - Investment managers allowed up to 25 percent of total retail assets in non-CMA portfolio investments; pension funds may transfer up to 20 percent.
- Exchange rate management:
  - Tightened domestic investment rules would not substantially manage the exchange rate peg.
  - Reduced net outflows could permit higher reserve accumulation initially, but capital mobility under CMA allows circumvention (individual direct investment abroad; banks shifting operations and investing abroad).
  - Banks in 2006 placed excess liquidity abroad: increase in liquid liabilities exceeded increases in net domestic assets; banks placed the difference abroad.
- Impact on government securities and NSX:
  - Government securities outstanding "22 percent of GDP in mid-2007"; limited supply could diminish secondary market liquidity and force a scarcity premium, reducing bond yields.
  - Net effect on NSX unclear: 19 existing dual-listed companies account for "approximately 95 percent of market capitalization"; incentives for these companies to list could decline; potential delisting could reduce NSX capitalization.
- Market-based alternatives recommended:
  - Broaden investable asset range: mortgage securitization; development of public agency and corporate bond markets; securitization of funding of public enterprises; factoring and leasing; private equity.
  - Mortgage securitization: Namibia appears well placed; requires strong legal/institutional infrastructure; examples: Chile (about 15 percent of pension fund portfolios), Malaysia, Hong Kong, Hungary noted.
  - Corporate bond market: end-2006 bonds outstanding on NSX N$8.2 billion; government bonds 82 percent of that; corporate/public enterprise bonds about 4 percent of GDP by end-2007.
  - Encourage credit-worthy public enterprises (example: Nampower N$500 million 13-year bond oversubscribed by 70 percent).
  - Privatization, factoring, leasing, and private equity can diversify asset classes and deepen markets but require information, governance, and exit options.

### X. Natural resource management — institutional assessment and fiscal implications
- Mineral sector overview:
  - Since independence, mineral exports averaged 21 percent of nominal GDP and 57 percent of total exports; taxes and royalties on minerals averaged 7½ of central government revenues.
  - Mining employment small: Chamber of Mines estimate (2004) less than 7,500 (around 2 percent of total employment).
  - Composition (2006, US$ value): Diamonds 70%; Uranium 15%; Zinc 7%; Gold 3%; Copper 3%; Other 2%.
  - Diamonds: produce more than 2 million carats of gem-quality diamonds a year; diamond exports averaged 14½ percent of nominal GDP and 39 percent of total exports since independence; taxes/royalties on diamonds averaged 6½ percent of central government revenues; marine mining accounted for almost half of production in 2006.
  - Major producers: Namdeb (50-50 government/DeBeers joint venture producing over 90 percent of Namibia’s diamonds), Rössing Uranium, Anglo American (Skorpion), Namzinc, Rosh Pinah, AngloGold Ashanti Namibia, Okorusu Fluorspar.
- Petroleum and gas prospects:
  - Kudu offshore gas: proven reserves 1.3 trillion cubic feet; sufficient for an 800-megawatt plant for more than 20 years; total project cost expected US$1 billion; government included N$750 million (US$125 million) in MTEF; Nampower issued N$500 million (US$71 million) of planned N$3 billion bond; production expected to begin in 2010 but could be delayed.
  - Namcor: state-owned oil importer; private oil companies required to source 50 percent of oil from Namcor.
- Institutional strengths and recommendations:
  - Namibia ranked low on corruption (Transparency International 2006: fifth lowest among 45 African countries surveyed).
  - IMF (2006) review: Minerals Act and Diamond Act in line with international best practice; recommendations include considering EITI, improving budget classification, public availability of information, audit capacity, supervision of parastatals, clarifying Minister powers, and enacting royalty rates into law.
  - Legal specifics: Minerals Act 1992; Diamond Act 1999; licensing and royalty arrangements described; mining contracts not publicly available.
- Fiscal management:
  - Mineral revenues included in central government budget; exceptions: 3 percent royalty to Diamond Valuation Fund and 0.05 percent to Diamond Board Fund not reflected in budget.
  - Tax regime: corporate profit tax: Diamond companies 55 percent; non-diamond mineral companies 37.5 percent; ordinary non-mining corporations 35 percent.
  - Diamond royalty: 10 percent on value of rough diamond exports; government considering up to 5 percent royalty on non-diamond mining companies.
  - IMF recommendations: keep 10 percent diamond royalty; set 2–3 percent royalty for other hard minerals; apply 10 percent diamond royalty to all diamonds produced in Namibia; keep corporate tax rates at 55 percent (diamond) and 37.5 percent (other mining); publish mining agreements.
- Fiscal volatility and stabilization:
  - Mineral sector smaller and less volatile relative to many peers: diamond export share 14.7 percent of GDP (1997–2006) with standard deviation 2.1; mineral revenues averaged 2.5 percent of GDP with standard deviation 1.2.
  - SACU revenues have larger fiscal impact: SACU revenues averaged more than 9 percent of GDP over past ten years versus 2–3 percent for mineral revenues; a one percentage point of GDP increase in SACU receipts correlated with a 0.68 percentage point of GDP increase in total spending.
  - Namibia does not use a specific stabilization fund; government fiscal goal: limit public debt to 25 percent of GDP or less; MTEF used to smooth spending.
- Annuity valuation of diamond revenues:
  - Appendix assumptions (2006 = year zero): Nominal interest, i: 12.0%; Real GDP growth: 5.0%; Inflation: 5.5%; Nominal GDP growth, g: 10.8%.
  - Baseline annuity value of diamond tax revenues: 0.40 percent of GDP per year.
  - Sensitivity: (i–g) scenarios produce annuities: 2.0% -> 0.54; 1.2% -> 0.40; 0.5% -> 0.23 (percent of GDP).
  - Scenario annuities: Baseline 0.40 percent of GDP; Optimistic 0.48 percent of GDP; Pessimistic 0.33 percent of GDP.
  - Policy implication: annuity values 0.6 percent of GDP or less under all scenarios, compared with recent diamond tax revenues of 1½–3½ percent of GDP; government should save the difference (about one percent of GDP or more) to smooth revenues.
  - Conclusion: no strong case for a dedicated mineral stabilization/savings fund given modest annuity values and existing fiscal institutions.

### XI. Unemployment — magnitude, causes, and policy responses
- Magnitude and trends:
  - Annual GDP growth 2000–2005: 4.6 percent; unemployment rose from 34.5 percent in 2000 to 36.7 percent in 2004 (broad definition).
  - Employment growth <1 percent per annum during 1992–2004; labor force growth about 3 percent per annum; unemployment rose from 19 percent in 1992 to 37 percent in 2004.
  - Labor force composition (including discouraged workers): Employed 385,329; Unemployed and Looking 108,119; Unemployed and Not Looking 115,162.
  - Almost half of the unemployed are not seeking jobs; 56 percent of active jobseekers unemployed more than 2 years.
  - Unemployment heterogeneity (broad definition): regional range 19 percent to 65 percent; rural 45 percent; urban 29 percent; female 43 percent; male 30 percent; age 20–24 unemployment 57 percent; those with less than secondary education unemployment >30 percent.
- Causes and structural factors:
  - Low skills: only 20 percent of working-age population educated beyond junior secondary; senior secondary raises employment probability by 60–80 percent relative to no education; skilled workers earn about 5 times unskilled; professional/managerial about 10 times.
  - Economic structure: primary sector employment declined by 3.6 percent per annum (1997–2004); secondary declined by 0.8 percent; service sector expanded 1.7 percent per annum. Mining is capital-intensive and small employer; agriculture’s comparative advantage limited; manufacturing accounts for 12–13 percent of employment and GDP.
  - Labor costs: median monthly wage for production worker higher than most middle-income countries except South Africa; non-wage benefits significant.
  - Institutional rigidities: hiring/firing regulations, difficulty hiring part-time and expatriate workers, lack of temporary agency regulation.
  - New Labor Act: changes to dispute resolution (conciliation and arbitration), leave entitlements (current annual leave 24 consecutive days; new Act provides 24 working days plus 5 compassionate days).
  - Unionization: high among government employees (57 percent); union members earn about 45 percent higher mean hourly wage vs non-union.
- Policy responses:
  - Short- and medium-term: encourage faster growth in low-skill job opportunities; relax work permit regime for critical foreign skills; eliminate undue restrictions on temporary work and dismissals to encourage hiring.
  - Long-term: strengthen education and training (junior secondary quality, higher secondary/tertiary access, continuing education); implement Education and Training Sector Improvement Program (ETSIP) phased over 15 years with first-phase funding secured in May 2007.
  - Public sector: adopt pro-business approach; improve civil service capacity via National Institute of Public Administration and Management (scheduled opening 2009).

### XII. Staff policy conclusions and recommendations (cross-cutting)
- Macroeconomic stance:
  - Recent large current account surpluses are partly temporary (tight fiscal stance and SACU receipts) and likely to moderate as fiscal savings unwind.
  - Projected underlying external current account surplus of 5 percent of GDP in 2012.
- Pension/insurance and domestic investment policy:
  - Government considering regulatory steps to slow capital outflows and encourage domestic investment in pension and life insurance industry.
  - Tightening domestic investment requirements may be enforceable only with difficulty, risk reducing returns, increasing inflationary pressure, and being circumvented under CMA mobility.
  - Strong case for market-based measures to attract domestic investment: broaden investable assets (mortgage securitization, corporate bond market, factoring, leasing, private equity), strengthen real returns on domestic investments, and improve institutional capacity and governance to make domestic opportunities attractive.
- Natural resource management:
  - Namibia’s institutional framework for minerals is rule-based and largely consistent with best practice; recommended legal refinements (define royalty rates, limit Ministerial discretion), greater transparency (publish agreements), and improvements in public financial management and audit/supervision of parastatals.
  - No compelling case for a separate mineral stabilization fund; saving the difference between actual mineral revenues and annuity values (about one percent of GDP) is advisable.
- Labor market and human capital:
  - Priority on strengthening education and training, making labor markets more flexible, and fostering labor-intensive sectors to reduce persistent unemployment.
- Sequencing and caution:
  - If domestic investment requirements are tightened, phase implementation carefully to avoid large short-run repatriation of capital that would be inflationary and raise real exchange rate pressures given high SACU receipts and mineral export inflows.
  - Market-based incentives and improvements to the business environment are preferred to forced repatriation for deepening financial markets and protecting real returns to savers.

*Prepared from the content of the IMF PDF chapter/section provided.*

### References..............................................................................................................

### _cr0882 - References

### I. Introduction — framing the selected issues papers
- Namibia’s economic position strengthened over the past year due to a substantial terms of trade improvement and large receipts from the Southern African Customs Union (SACU), contributing to significant external current account and fiscal surpluses.
- Macroeconomic challenge: promote stronger and more broad-based growth while preserving macroeconomic stability in the context of possible declines in the terms of trade and SACU receipts.
- Purpose: complement the staff report for the 2007 Article IV consultation with additional analytical coverage in the following areas: external current account developments (Chapter II); capital outflow regulation and domestic investment (Chapter III); management of non-renewable natural resources (Chapter IV); and unemployment challenges and policy responses (Chapter V).

### II. Namibia: Current Account Developments — summary findings and approach
- Empirical observation:
  - Namibia has experienced uninterrupted current account surpluses since independence in 1990.
  - The estimated surplus surged to more than 15 percent of GDP in 2006.
  - After averaging 3 percent of GDP during 1990–2002, the surplus rose to an average of 7 percent in 2003–05, and then to an estimated average of 17 percent of GDP in 2006–07.
  - The 2007 estimate is projected using first-half data.
- Cross-country context:
  - In 2006, Namibia was in the top 10 percent of lower middle-income countries (LMICs) ranked by current account performance; most strong performers were petroleum exporters or mineral exporters benefiting from high global commodity prices.
- Assessment framework:
  - Underlying current account position excludes temporary factors (short-lived fiscal shifts, temporary terms of trade shocks, lagged exchange rate impacts) and is derived from the medium-term macroeconomic framework.
  - External stability assessment requires:
    - Understanding the observed current account.
    - Projecting medium-term evolution (which temporary factors will unwind; new influences).
    - Estimating the equilibrium current account (consumption-smoothing needs, resident goals for net external assets, avoiding abrupt capital/financial flow shifts).
  - Three common approaches: (a) macroeconomic balance (MB), (b) external stability (ES), (c) equilibrium real exchange rate (ERER). This paper focuses on MB and ES; ERER work is referenced to Miyajima (2007) and a separate update in the 2007 Article IV staff report.
- Analytical strategy:
  - Sections A–B extend the macroeconomic balance approach through detailed assessment of determinants of savings and investment.
  - Section C explores implications for net foreign assets using the external stability approach.

### III. Savings–Investment Trends — identity and decomposition
- Identity used: CAB = SAV – INV = (SAV_pub – INV_pub) + (SAV_priv – INV_priv)
  - CAB = current account balance; SAV = national savings; INV = gross domestic investment; pub/priv denote public and private sectors.
- Observed drivers (high-level):
  - Both increased public and private savings contributed to the increased current account surplus.
  - The initial strengthening of the current account from 2003 was largely driven by private sector savings; the further increase in 2006–07 is explained roughly 50-50 by public and private developments.
- Tabulated change contributions (changes from 1990–2002, in percent of GDP):
  - For 2003 to 2005 and 2006 to 2007 the table reports:
    - Public savings; Public investment; Public finances 1/; Private savings; Private investment; Private finances 1/; External current account.
  - Specific figures excerpted:
    - 2003 to 2005: Public savings -0.3; Public investment 7.1; Public finances 1/ -0.6; Private savings -0.3; Private investment 0.2; Private finances 1/ 7.4; External current account 9.9.
    - 2006 to 2007: Public savings 13.4; Public investment 6.4; Public finances 1/ 6.7; Private savings 3.5; Private investment 6.7; Private finances 1/ 3.7; External current account 14.1.
  - Note: 1/ Net acquisition of financial assets, or savings minus capital investments.
- Public sector specifics:
  - Public saving rose sharply in 2006 and a further strong outturn is projected for 2007.
    - After averaging 1.5 percent of GDP during 1990–2005, public saving rose to nearly 8 percent of GDP in fiscal year 2006/07, and a further increase to 9 percent is projected for 2007/08.
    - With broadly stable public investment relative to GDP, this tightening of the fiscal stance makes a substantial contribution to the strong external current account in 2006–07.
  - Fiscal composition of savings relative to the 1990–2005 average (in percent of GDP), Table II.2 contributions:
    - For 2003/04 to 2005/06 and 2006/07 to 2007/08 the contributions from: lower current spending; higher SACU receipts; higher mining taxation; higher other revenue & grants; and resulting fiscal savings are reported.
    - Specific figures excerpted:
      - 2003/04 to 2005/06: Fiscal savings -0.3; Lower current spending 0.6; Higher SACU receipts 0.5; Higher mining taxation -0.9; Higher other rev. & grants -0.9.
      - 2006/07 to 2007/08: Fiscal savings 7.1; Lower current spending 3.2; Higher SACU receipts 4.8; Higher mining taxation 0.0; Higher other rev. & grants -0.5.
  - Drivers: Expenditures were compressed as budget ceilings proved tight relative to strong nominal GDP growth (contributing about 3 percentage points of GDP to public savings); strong SACU receipts contributed about 4–5 percentage points to savings.
  - Medium-term projection: fiscal stance projected to ease as SACU receipts moderate relative to GDP and public investment spending is projected to increase; projected shortfall of public savings relative to investments over the medium term is 2-2½ percent of GDP, smaller than the shortfall over 1990–2005.
- Private sector specifics:
  - Private savings increased around 2003.
    - Compared to the preceding 1990–2002 period, savings in 2003–05 were up 8 percentage points of GDP, only partly offset by a rise in investment spending, contributing to a stronger current account.
  - The accumulation of net foreign assets associated with private sector savings is identified as less well understood and a topic for further analysis.

### IV. Policy-relevant implications drawn in the content
- Macroeconomic policy stance:
  - The recent large current account surpluses are in part temporary, reflecting a tight fiscal stance projected to ease, implying current surpluses may moderate as fiscal savings unwind.
- Financial regulation and investment policy (as noted in the introduction for Chapter III):
  - The government is considering regulatory steps to slow capital outflows through the pension and life insurance industry and encourage more domestic investment.
  - Chapter III explores international experience with such regulations and highlights risks; a case is made for expanding the range of investable assets to encourage a market-based shift toward greater domestic investments.
- Natural resource management (Chapter IV summary from introduction):
  - Namibia’s mineral sector is benefiting from a substantial rise in global commodity prices.
  - Chapter IV finds that current institutions are well-placed to manage new mineral investments and exports, though a number of public financial management reforms would be beneficial.
- Labor market policy (Chapter V summary from introduction):
  - Outside the mineral sector, weak job growth and stubbornly high unemployment are main challenges.
  - Chapter V emphasizes strengthened education and training and more flexible labor markets as important policy directions to reduce unemployment.

*Prepared from the content of the PDF chapter/section provided.*

### 20.       A number of factors might be expected to influence private savings trends:

### _cr0882 - 20.       A number of factors might be expected to influence private savings trends:

### Factors identified as potentially influencing private savings
- Per capita real GDP growth: international experience suggests a positive relationship between income growth and savings rates.
- Real interest rates: models of consumption behavior commonly find that durables spending is influenced by borrowing costs.
- CPI inflation: where financial markets are not well-developed, and savings are either in cash or low-yielding bank deposits, high inflation erodes savings, encouraging increased consumption.
- Mineral exports in percent of GDP: on the hypothesis that the marginal propensity to save out of volatile mineral incomes is lower, an increase in mineral incomes would boost savings.
- Contractual savings: Namibia’s well-developed pension and life insurance schemes would encourage savings, to the extent that they are not offset by reduced voluntary savings.
- The real effective exchange rate: a more competitive exchange rate boosts incomes and savings through a positive impact on net exports.

### Regression analysis of private savings (1990–2006)
- Period analyzed: 1990–2006.
- Statistically significant explanatory variables identified: CPI inflation and real interest rates.
- Real interest rate explanatory power was inferior and lost significance when the inflation term was included.
- Contractual savings role not assessed due to absence of pertinent data.
- No significant role identified for per capita real GDP growth, mineral exports (percent of GDP), or the real effective exchange rate.
- Fitted equation (as documented):
  - SAVpriv = 35.41 - 1.14 INFL
    - (t-statistics in parentheses) (14.3) (4.3)
  - Adjusted R-squared = 0.52

### Interpretation, anomalies, and data concerns
- The economic basis for the strong inflation–savings relationship is not entirely clear; the role for inflation is much larger than international experience would suggest and may proxy for other influences.
- The rise in private saving in 2003 is notable and associated with:
  - A sharp fall in real consumption expenditures in 2003.
  - No increase in real consumption expenditures even when averaging across the two years to 2003, despite an increase in real GDP of more than 10 percent.
  - A surge in private investment in 2003 (possible real shift between consumption and investment, or statistical artifact).
  - Possible underestimation of imports starting around 2003, which would contribute to: (i) estimated strengthening of the current account at that time; and (ii) the surge in recorded private saving.
- The estimated equation underpredicts private savings in 2006.
- The overperformance of savings is projected to persist through 2007 on available data; this may reflect increased mining incomes.
  - Mineral exports rose by 4 percent of GDP in 2006.
  - Mining operations are largely foreign-owned, but increased incomes may have boosted recorded savings pending payment of taxes and remittance of dividends.
  - Absence of corporate income data makes quantification difficult.

### Projections and scenarios for savings, investment, and the current account
- Looking forward, savings are projected to converge toward levels predicted by the inflation model; this projection is tentative given uncertainties about the role of inflation and unexplained strength of savings in 2006 (and potentially 2007).
- One possibility is a faster return to savings levels more closely in line with historic norms than portrayed in the fitted model.
- Investment-GDP ratio modeling:
  - Attempts to model investment-GDP using real interest rates, per capita income growth, inflation rates, savings levels, and the real effective exchange rate found none consistently significant.
  - The best model of the investment-GDP ratio was obtained using a simple time trend.
  - The medium-term framework assumes a further increase in the investment-GDP ratio, but more gradual than over the preceding decade.
- Underlying external current account (medium-term projections):
  - Projected underlying external current account surplus of 5 percent of GDP in 2012.
  - Contributors to this projection:
    - An easing of the fiscal stance as a partly temporary rise in public savings is reversed.
    - A decline in private savings from exceptionally high levels in 2006 toward an underlying level driven by the inflation model.
    - A further modest rise in private investment, following recent trends.

### Implications and projections for Net Foreign Assets (NFA)
- Between 1998 and 2004, Namibia’s NFA position rose by an estimated 12 percentage points of GDP (net liability position declining from 19 percent of GDP to 7 percent).
- Based on a newly expanded IIP survey, Namibia had an NFA surplus of 22 percent of GDP in 2006.
- Table II.3 highlights notable datapoints (in percent of GDP): historic series and new series for 1998, 2004, 2005, 2006 (presented in the source).
- Key projection assumptions for NFA:
  - Foreign direct investments assumed to change in value by the difference between underlying inflation—measured by the GDP deflator—and economic depreciation over a 20-year time-horizon (5 percent per annum).
  - Portfolio investment holdings split into two-thirds equity and one-third fixed-income:
    - Equities assumed to rise in line with nominal GDP in South Africa.
    - Fixed-income earn a nominal interest rate.
    - Reinvested dividends on equity holdings assumed with a 2 percent dividend yield.
    - No exchange rate valuation effects assumed for the smaller share of investments held outside the common monetary area.
  - Alternative assumptions for pass-through from capital outflows to NFA:
    - Historically, difference between capital outflows and NFA accumulation estimated at about 5 percentage points of GDP per annum.
    - If this reflects incorrect attribution of non-resident dividend remittances or capital transfers, capital outflow data should be discounted for NFA purposes.
    - Alternatively, if mismatch reflects underestimation of historic NFA data, a pass-through closer to one might be expected.
- Projected profiles:
  - NFA projected to strengthen further but at a slowing pace.
  - If past trends of less than full pass-through continue, the NFA position would stabilize at about 60 percent of GDP.
  - Larger NFA positions possible with a more full pass-through from estimated capital flows to NFA.
- Numerical projection (lower profile): NFA projected to rise about 50 percentage points of GDP between 2005 and 2012.
  - Of this total:
    - About 11–12 percentage points reflects public sector desire to strengthen its financial position (decline in public debt from 30 percent of GDP in 2005/06 to 25 percent over the medium term, and rise in net international reserves from 5 percent of GDP in 2005 to 11–12 percent of GDP from 2007 through 2012).
    - Remaining roughly 38 percent of GDP increase in private sector NFA: partly reflects contractual savings abroad by pension and life insurance schemes.

### Risks and assessment of capital flow reversals
- The increase in private sector NFA does not appear to pose risks of abrupt shifts in capital flows for several reasons:
  - Portfolio investments abroad were equivalent to 66 percent of GDP at end-2006, largely comprising pension and insurance fund investments. These funds typically invest abroad to the extent regulations permit, limiting further outward flexibility. The main risk would be portfolio reallocations back to Namibia, but a major reversal by contractual savings funds toward Namibia appears unlikely unless investment conditions deteriorate very markedly in South Africa.
  - Direct investments represent a net foreign liability estimated at 41 percent of GDP at end-2006; these investments are largely in banking and mineral sectors, and abrupt reversal through divestments appears very unlikely given current profitability.
  - Other investments (loans and net foreign asset positions of the banking sector) are modest: under 3 percent of GDP for the private sector and parastatals, and 6 percent of GDP for the government sector; roll-over risk is not a significant concern.
  - At the margin, capital flows within the CMA may respond to interest differentials between Namibia and South Africa; the Bank of Namibia has kept official interest rates close to those in South Africa.

### Pension and insurance sector, capital outflows, and domestic investment requirements
- From 2004 to 2006:
  - Namibia’s gross national savings rate averaged 37 percent of GDP.
    - This is almost double the average for sub-Saharan Africa and 60 percent higher than the lower-middle income country average.
  - Domestic investments averaged 27 percent of GDP.
    - About 50 percent higher than the sub-Saharan average and slightly above the lower-middle income country average.
  - Excess savings over domestic investment were invested abroad, largely by pension and insurance industry.
- Capital outflows and asset magnitudes:
  - From 2003 to 2005, financial account outflows exceeded US$500 million per annum (approaching 10 percent of GDP) and surged to US$1.3 billion in 2006 (19 percent of GDP).
  - Net portfolio outflows averaged 15½ percent of GDP.
  - IIP data for mid-2007: total gross foreign assets estimated at 105 percent of GDP, with 70 percent portfolio investment.
  - South African assets made up approximately 80 percent of both total and portfolio investment.
  - Pension and insurance funds main intermediaries of portfolio outflows.
  - As of March 2004, pension and insurance total assets exceeded 100 percent of GDP; staff estimate total pension and insurance assets rose to about N$58 billion (US$ 8.2 billion) in mid-2007 or about 110 percent of GDP.
- Pension fund specifics:
  - Pension fund investments account for about 60 percent of combined pension/insurance total.
  - Pension fund assets under management measured N$21 billion (57 percent of GDP) as of March 2004.
  - Pension funds achieved real returns averaging a little over 3 percent between 2001 and 2004.
  - Namibia has more than 500 pension funds; the Government Institutions Pension Fund (GIPF) held about 73 percent of the industry total.
  - GIPF asset allocation (March 2005, in percent of total assets at book value):
    - Total: Namibia 38.3; South Africa 53.8; Other international 7.9; Grand total 100.0.
    - Equities: Namibia 20.5; South Africa 39.5; Other international 6.9; Total 66.8.
    - Fixed income: Namibia 10.8; South Africa 8.6; Other international 1.0; Total 20.5.
    - Cash: Namibia 6.2; South Africa 5.6; Other international 0.0; Total 11.7.
    - Property: Namibia 0.8; South Africa 0.2; Other international 0.0; Total 1.0.
  - As of end-2006 (GIPF reported): 46.5 percent of assets invested in South Africa, 19.0 percent in other foreign countries, 34.5 percent domestically.
  - Early 2002 data for private fund managers: 48 percent invested in South Africa, 17 percent in other foreign locations, 35 percent domestically; nearly one-half of domestic investments were in foreign companies dual-listed on the Namibian exchange, leaving true domestic investments (largely bonds and cash) under 20 percent of total portfolios.
- Insurance industry:
  - Insurance company assets totaled N$14.4 billion (42 percent of GDP) in March 2004; 92 percent held by long-term insurers.
  - Life insurance industry privately run: 16 long-term insurers and 12 short-term insurers; top three companies hold approximately 85 percent of the market.
  - No direct data on insurance returns; likely comparable to pension fund industry returns.

### Policy implications and options discussed
- Government is planning to tighten domestic investment regulations for the pension and insurance industries in light of high unemployment and weak employment growth.
- The chapter’s assessment:
  - Tightening investment requirements may not be fully enforceable and may not contribute to financial market deepening.
  - Regulations would likely increase domestic investment, but need cautious phasing to avoid:
    - Inflationary pressures.
    - Deterioration in asset quality.
  - Strong case is made for market-based measures to attract greater domestic investment by:
    - Broadening the range of investable assets.
    - Strengthening domestic returns on real sector investments.

### Conclusion (key summary points)
- Recent uptrend in Namibia’s current account surplus reflects increases in public and private savings:
  - First step-up around 2003 reflects an increase in private savings exceeding a parallel increase in private investment; the basis is not well-understood and statistical mismeasurement is possible.
  - Further rise to double-digit current account surplus in 2006 reflects increases in both public and private savings; public sector element reflects tight expenditure control and surge in SACU receipts; private saving increase less well-understood and may reflect low marginal propensity to consume out of higher mineral export earnings.
- NFA strengthening appears likely but is of uncertain magnitude due to data quality issues and lack of concordance between capital flow and IIP data.
- Projected further strengthening of NFA does not appear to pose risks of abrupt capital flow shifts, but risks could relate to investment repatriation exceeding domestic absorption capacity.
- Importance emphasized on careful management of regulations on domestic and overseas investments by pension and life insurance industries.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr0882.pdf*

### 43.      The Namibian stock exchange is primarily composed of dual-listed companies.

### 43.      The Namibian stock exchange is primarily composed of dual-listed companies.

### Composition of the NSX and domestic treatment
- The seven local firms listed on the exchange comprise only 0.3 percent of market capitalization.
- Forty-four percent of market capitalization represents firms having primary listings in Johannesburg and 55 percent represents firms having primary listings in London.
- Dual-listed firms are considered domestic for the purposes of Namibia’s domestic investment requirements.

### Regulations on foreign portfolio investments (CMA framework and limits)
- Namibia’s international capital flows are governed by the Common Monetary Area (CMA) agreement with Lesotho, South Africa, and Swaziland:
  - Free transfers of funds for current and capital transactions among CMA members.
  - CMA members must align exchange control provisions with South Africa’s, including controls on capital flows outside the CMA.
  - Individual limit of R2 million in investment outside the CMA.
  - Government approval required for outward direct investment of firms.
  - Investment managers allowed to invest up to 25 percent of total retail assets in non-CMA portfolio investments.
  - Pension funds may only transfer up to 20 percent of their total retail assets to acquire non-CMA portfolio investments.
- These regulations are applied by Namibian authorities to the pension and insurance industry.

### Domestic investment requirements and current rules
- In 1994 the government amended Regulation 28 of the Pension Fund Act and Regulation 15 of the Long-Term Insurance Act to gradually increase to 35 percent the share of portfolios that pension and insurance funds must invest in domestic assets.
- Shares of dual-listed companies on the NSX are considered domestic if they are purchased on the NSX; 7 local and 19 dual-listed companies on the NSX qualify.
- Unit trusts are not required to comply with the domestic asset requirements, but do so in practice to attract investments from pension funds and insurance companies.

### Proposed tightening of domestic investment requirements (preliminary proposals)
- Institutional investors would be required to invest a minimum of 5 percent of assets under management in unlisted Namibian firms.
- The value of dual-listed companies that qualify for domestic status would be reduced from 100 percent to 10 percent in a phased manner over five years. An initial plan indicated:
  - Credit for domestic investments in dual-listed firms would fall to 30 percent in the first year of implementation, and by a further 5 percentage points each subsequent year, reaching 10 percent in the fifth year.
- Unit trusts would be subject to the same domestic investment requirements as pension and insurance funds and their tax-exempt status would be eliminated.
- Government rationales: keep capital at home to promote local economic and financial market development (Bank of Namibia quote in June 2007 Quarterly Bulletin: “Outflows of resident capital from Namibia have been rising and the argument can be raised that, had this capital been available domestically, it could have encouraged domestic investment and enhanced economic development (p. 48).”)

### Rationale, international context, and alternative explanations for capital flows
- Explanations for weak capital inflows to poorer countries (Lucas Paradox) include differences in technology, human capital, government policies, institutional structure, sovereign risk (repayment/expropriation), and asymmetric information.
- Namibia may benefit from strengthening investor-relevant institutions: protection of investor rights, flexible labor markets, and a good education system.

### Portfolio allocation, home bias, and Namibia’s observed behavior
- CAPM implication: true global portfolios allocate by market capitalization (e.g., United States 39 percent, developed Europe 26 percent, Africa 1½ percent).
- In practice, most funds show “home bias” — a majority in domestic assets.
- Namibia’s pension and life insurance portfolios show very modest home bias:
  - Funds are close to the 20 percent limit on non-CMA assets and not much higher than the 35 percent floor on domestic investments, suggesting regulations are binding.
  - If restricted to CMA investments, CAPM would imply 98 percent of Namibian portfolios should be invested in South Africa.
  - Absence of exchange rate exposure for CMA assets further limits home bias.

### International experience with domestic investment requirements
- Countries with such limits include Argentina, Chile, Hungary, Poland, Germany, Japan, and Canada; many limits are more stringent than Namibia’s proposed measures.
- Table III.4 (selected figures preserved from source):
  - Namibia*: Required Minimum 35, Actual 35.4
  - Weighted Average (Mature Markets) 1/87.2
  - Weighted Average (Emerging Markets) 1/94.2
  - Note: P = prudent person rule applies; * = includes dual listed stocks as domestic; 1/ Weighted by GDP.

### Exchange rate considerations and circumvention risks
- Tightened domestic investment requirements would not substantially manage the exchange rate peg:
  - Reduced net outflows could permit higher reserve accumulation initially.
  - Capital mobility remains largely unrestricted under the CMA; individuals and banks could circumvent tighter regulations:
    - Individuals could invest directly abroad.
    - Banks might shift operations out of the local market, offer domestic liabilities to pension/insurance companies, then invest abroad themselves.
  - Current banking practice: banks placed excess liquidity abroad. In 2006, increase in banks’ liquid liabilities exceeded increases in net domestic assets; the banks placed the difference abroad.
- Figure III.2 indicates increasing Net Foreign Assets of the banking system, 2005–07 (N$ Billions) with series for Net Foreign Assets, Net Domestic Assets, Liabilities and data points for 2005, 2006, Oct. 2007 (chart referenced in source).

### Implications for portfolio returns, risk, and prior Namibian experience
- Evidence that more restrictive regimes generate lower pension returns (World Bank): during 1984–96 average real pension return in Ireland, Netherlands, UK, US was 9½ percent versus 6½ percent in more tightly-regulated countries.
- Risks of tighter domestic requirements:
  - Reduced diversification, lower returns, higher risk if domestic opportunities are limited.
  - Lack of reliable financial information for unlisted companies and limited in-house capacity to evaluate such investments.
- Namibia’s Development Capital Portfolio (DCP) experience:
  - GIPF set up DCP in 1995 aiming to invest 5 percent of assets; a decade later government concluded DCP failed due to lack of sound management.
  - GIPF wrote off 84 percent of the value of its investments in unlisted companies (N$630 million of its N$750 million investment).
  - GIPF now invests in unlisted firms via venture capital firms and government institutions.
- Namibia Harvest Investments (NHI) example:
  - Raised N$200 million in 1998 for venture capital but returned two-thirds to investors in 2001 due to lack of investment opportunities.

### Modeling the proposed requirements and quantitative impacts (Table III.5 results)
- Under assumptions in Table III.5:
  - A. Domestic Status of Dual-Listed Companies: Current 100% → Year 1 30% → Year 2 25% → Year 3 20% → Year 4 15% → Year 5 10%
  - Dual-Listed Companies (% of Portfolio) 1/: 15.0% (assumed constant)
  - Contribution to Domestic Investment Requirement (DIR): Current 15.0% → Year 1 4.5% → Year 2 3.8% → Year 3 3.0% → Year 4 2.3% → Year 5 1.5%
  - Asset Shift Need to Meet the DIR: Current 0.0% → Year 1 10.5% → Year 2 11.3% → Year 3 12.0% → Year 4 12.8% → Year 5 13.5%
  - Asset Shift Need in N$ Billions: Current $0.0 → Year 1 $7.6 → Year 2 $9.3 → Year 3 $11.4 → Year 4 $13.8 → Year 5 $16.7
  - Asset Shift Need in percent of GDP: Current 0.0% → Year 1 11.8% → Year 2 12.8% → Year 3 13.9% → Year 4 15.0% → Year 5 16.2%
  - B. Investment Requirement in Unlisted Namibian Companies: Current 0% → Years 1–5 5%
  - Unlisted Companies (% of Portfolio) 2/: Current 1.5% → Year 1 2.2% → Year 2 2.9% → Year 3 3.6% → Year 4 4.3% → Year 5 5.0%
  - New Investment in Unlisted Companies (% of Portfolio): Current 0.0% → Years 1–5 0.7%
  - New Investment in Unlisted Companies in N$ Billions: Current $1.0 → Year 1 $1.6 → Year 2 $2.4 → Year 3 $3.4 → Year 4 $4.6 → Year 5 $6.2
  - New Investment in Unlisted Companies in percent of GDP: Current 1.7% → Year 1 2.5% → Year 2 3.3% → Year 3 4.2% → Year 4 5.1% → Year 5 6.0%
  - Memo Items:
    - Portfolio Assets (N$ Billion): Current 58.0 → Year 1 64.9 → Year 2 72.7 → Year 3 81.6 → Year 4 91.5 → Year 5 103.0
    - % of GDP: 111 112 114 116 118 120
    - GDP (N$ Billion): Current 52.2 → Year 1 58.0 → Year 2 63.8 → Year 3 70.3 → Year 4 77.5 → Year 5 85.8
  - Notes: 1/ Assuming no portfolio shift away from dual listed companies. 2/ Assuming 5-year phase-in of 5% requirement.
- Key modeled implications:
  - If dual-listed companies are scored at 10 percent (rather than 100 percent), their contribution to the 35 percent domestic rule would fall from around 15 percent (currently) to 1½ percent.
  - Fund managers would need to shift at least 13½ percent of their portfolios out of foreign capital or dual-listed companies to finance new domestic investments (phased outcome per Table III.5).
  - With total portfolios more than 100 percent of GDP, the shift in assets could be significantly more than 10 percent of GDP.
  - If scoring falls from 100 to 30 percent in the first year, required shift over first 12 months would be equivalent to 10½ percent of total portfolios.

### Where repatriated assets would be allocated and absorption constraints
- Repurposed assets would be split among:
  - Investments in unlisted companies (to meet the 5 percent minimum), listed Namibian equities, government bonds, cash, or other investments (such as property).
- Current unlisted companies account for about 1½ percent of pension fund assets; a further shift of 3½ percent of fund assets would be needed to reach 5 percent.
- Capacity and macro risks:
  - Capital inflows equivalent to 10½ percent of GDP would likely cause considerable inflationary pressures and associated real exchange rate appreciation unless phased in over many years.
  - Inflationary risks would be particularly marked given record SACU receipts and high mineral exports already putting upward pressure on Namibia’s real exchange rate.
  - Institutional capacity is limited: only 7 locally-listed firms on the NSX; government budget close to balance so supply of government debt unlikely to rise substantially.
  - Risk of asset price inflation appears high; safe domestic investments (bonds, cash) would likely yield lower returns than current foreign equity holdings, reducing returns to savers.

### Historical lessons and incentives for market development
- Past government attempts to stimulate domestic unlisted investment (DCP, NHI) encountered weak investment opportunities, poor management, and large losses.
- Policymakers face a tradeoff: tighter domestic investment requirements could promote domestic market development and retain capital, but could also reduce diversification, lower returns, strain absorption capacity, and be circumvented under CMA mobility arrangements.

*Source: IMF staff discussion in the referenced chapter of the provided IMF PDF content.*

### 66.      It is unclear what effect tightened domestic investment requirements will have

### _cr0882 - 66.      It is unclear what effect tightened domestic investment requirements will have

### Impact on Namibia’s capital and government securities markets
- The government securities market is "already well-developed, with active secondary trading in Treasury bills."
- Outstanding government securities amounted to "22 percent of GDP in mid-2007."
- With "limited supply on account of relatively small government deficits," excess demand may develop, which could:
  - "diminish secondary market liquidity and force a scarcity premium, reducing bond yields."
- Comparative experience: Chile—"pension fund assets are growing much faster than the stock of high quality bonds."

### Impact on the Namibia Stock Exchange (NSX)
- Net effect of tightened domestic investment requirements on listing incentives is "hard to predict."
- Incentives for the 19 existing dual-listed companies (which account for "approximately 95 percent of market capitalization") will "decline."
- If a portion of these dual-listed companies delist, "capitalization of the NSX could decline."

### Policies to encourage financial flows to Namibia — broad market-based options
- Broadening the range of investable assets considered:
  - "mortgage securitization"
  - "development of the public agency and corporate bond market"
  - "securitization of funding of existing public enterprises"
  - "development of the factoring and leasing sector"

### Mortgage securitization: rationale, requirements, and lessons
- Rationale:
  - "A great deal of wealth is tied up in property"—mortgage securitization can "provide access to a new asset class for institutional investors."
  - "Pension and insurance funds provide a potentially large source of funding for housing" and can "manage the liquidity risk of housing loans" given long-term liabilities.
- Requirements and constraints:
  - "Requires a strong legal and institutional infrastructure and well-developed primary mortgage markets."
  - "There must not only be demand from institutional investors but willingness by lenders to seek access to the capital markets."
  - "Funding through deposits may be less expensive for banks than funding through mortgage securities."
- Government enabling roles:
  - "Create and maintain a strong legal system that supports collateralized lending."
  - "Accept mortgage-backed securities as collateral at the central bank discount window."
- Emerging market lessons (Box III.1 highlights):
  - Chile: "about 70 percent of mortgage financing in Chile has come from mortgage securities; these securities now make up about 15 percent of pension fund portfolios."
  - Malaysia: Cagamas Berhad purchases mortgage loans; its debt is rated AAA and carries a "risk weighting of 10 percent, compared with a 50 percent rating for housing loans."
  - Hong Kong: HKMC at end-2002 responsible for "5 percent of outstanding residential mortgages and 7 percent of the corporate debt market"; development hampered by "excess liquidity" and short-term bias of institutional investors.
  - Hungary: mortgage bond market created in 1997; government subsidies for loans less than "Euro 380,000" caused distortions.
- Namibia-specific assessment:
  - "Namibia appears well placed to develop a mortgage backed securities market."
  - "Namibia’s financial market is relatively sophisticated and well regulated."
  - "Banks have a high concentration of assets in residential mortgages," creating incentive for securitization.
  - Close ties to South Africa "should make it easier to develop products and tap expertise."

### Development of public agency and corporate bond markets
- Rationale:
  - Corporate bond markets provide additional assets for domestic investment and allow firms to diversify capital structures and spread risks.
- Current status and statistics:
  - "As of end-2006, the value of all bonds outstanding on the Namibia Stock Exchange was N$8.2 billion."
  - Of that N$8.2 billion: "government bonds accounted for 82 percent, commercial bank bonds (Bank Windhoek, First National Bank, and Standard Bank) for 9 percent, and state owned enterprise bonds (Nampower and the Road Fund) for 8 percent."
  - "As of end-2007, the value of corporate and public enterprise bonds was approximately 4 percent of GDP."
- Government roles and examples:
  - Ensure legal and regulatory infrastructure: "clearing and settlement system; a regulatory structure that provides for adequate disclosure, accounting standards, and corporate governance; the availability of credit rating agencies; and a clear policy with regard to corporate bond market development."
  - Catalyst role: encourage "credit worthy public enterprises to issue local currency bonds."
  - Example: Nampower issued "N$500 million in 13-year corporate bonds" as the first tranche of an expected "total issuance of N$3 billion"; the bond was "oversubscribed by 70 percent and priced at 105 basis points above the year 2020 South African government bond."
- Caution:
  - Avoid increasing contingent liabilities; allow only "public enterprises that have reliable income streams and good credit" to borrow and "make clear that such bonds are not implicitly backed by a government guarantee."

### Privatization, factoring, leasing, and private equity
- Privatization:
  - Diversifying ownership of public enterprises could broaden the number of listed domestic companies.
  - Example: In 2006 the government "sold 34 percent of the mobile phone provider MTC, raising N$648 million in public funds."
- Factoring and leasing:
  - Promoting these sectors could help develop non-government securities markets; such firms could "issue commercial paper or medium-term bonds" and improve SME access to finance.
- Private equity:
  - Benefits: "alternative vehicle for institutional investment," deepen markets, "provide management expertise," and offer "another asset class that enhances diversity and has the potential for high returns."
  - Risks and prerequisites:
    - Concerns about "(i) the quality of information available to investors, (ii) regulatory and legal standards, and (iii) the ability of investors to exit."
    - Need for "accurate and timely information" and "statutory protection for minority shareholder rights."
    - Exits usually via "initial public offerings, sales to strategic investors, or management buyouts"; IPOs have been the dominant and typically more profitable exit in mature markets.

### Strengthening the business sector and investment productivity
- Namibia strengths:
  - World Bank’s Doing Business 2008 ranked Namibia "43 out of 178 countries" with positive ratings on "licensing framework, enforcing contracts, and credit availability."
  - World Economic Forum’s Global Competitiveness Report 2007–08 rated Namibia "89 out of 131 countries" with strengths in "the macroeconomy, infrastructure, and institutions."
- Suggested priorities from FIAS assessment:
  - "Focus on labor skills and protection for property rights."
  - Replace outdated foreign investment law.
  - Simplify business incentives and consider "a simpler and less discretionary regime with a lower corporate tax rate."
  - Improve education quality and labor market flexibility (see Chapter V).
- Investment productivity:
  - Namibia’s "domestic investment ratio of around 27 percent" is "already above the average of 25 percent for lower middle-income countries."
  - Higher total returns may come from "making existing investments more productive" rather than further increases in the investment ratio.
  - Suggests reforms to "strengthen the domestic investment climate" and "diversify ownership of public enterprises."

### Conclusion — staff observations on planned tightening of domestic investment requirements
- Similar rules exist elsewhere, but "in many cases, these rules are driven by prudential concerns about exchange rate exposure, which do not apply in Namibia’s case."
- Where tight requirements were adopted, they often came "at the expense of rates of return and the risk profile" and sometimes encouraged "politically-motivated investment decisions that proved financially costly."
  - Recommendation: "Steps should be taken to make sure that there are sufficient assets to meet the demand generated by such requirements and projects are adequately screened."
- "Domestic investment rules do not necessarily promote financial market deepening" and can "distort yields and retard market development."
  - Impact on NSX is "particularly unclear" given competing incentives to list or remain unlisted and "the clear loss of incentive for the larger foreign companies to remain listed."
- Tighter rules "will not necessarily reduce capital outflows" because they "can be readily circumvented" and may have perverse effects if perceived as an attempt to force capital to remain.
- Phasing and macroeconomic impact require careful scrutiny:
  - Strict enforcement would "require a large, short-run repatriation of capital" which "in all likelihood, this would be inflationary (for asset prices, and for the underlying investments) and fuel pressures for real exchange rate appreciation."
  - Given "the high levels of foreign currency inflows from mineral exports and the SACU regime, the timing of the proposed capital repatriation does not appear opportune."
- Market-based incentives for investment repatriation are attractive because they promote "new patterns of financial intermediation (mortgage financing, factoring and leasing, etc)" and "would likely channel investments to areas of unmet demand for financing, thereby reducing inflationary risks."
- Strengthening the business environment would allow pension and insurance funds to invest domestically "without undermining the real return on their clients’ savings."
- Given that "Namibia’s investment ratio is already high," priority should be on "making more of these existing investments," including reforms to "further strengthen the domestic investment climate" and "diversify ownership of public enterprises."

*Source: _cr0882 — IMF staff report (excerpt).*

### 90.      Although Namibia’s mineral sector is smaller—relative to GDP—than in many

### _cr0882 - 90.      Although Namibia’s mineral sector is smaller—relative to GDP—than in many

### Overview of Namibia’s Mineral Sector (non-petroleum)
- Key finding: Non-renewable natural resources are a significant contributor to Namibia’s economy, though less than in other natural resource producers.
- Historical contribution since independence (1990):
  - Mineral exports have averaged 21 percent of nominal GDP.
  - Mineral exports have averaged 57 percent of total exports.
  - Taxes and royalties on minerals have averaged 7½ of central government revenues.
- Employment:
  - Chamber of Mines estimate (2004): total mining sector employment less than 7,500 (around 2 percent of total employment).
- Composition of mineral exports (2006, US$ value):
  - Diamonds: 70%
  - Uranium: 15%
  - Zinc: 7%
  - Gold: 3%
  - Copper: 3%
  - Other: 2%
- Diamonds:
  - Account for 70 percent of total mineral exports.
  - Namibia produces more than 2 million carats of gem-quality diamonds a year.
  - Since independence, diamond exports have averaged 14½ percent of nominal GDP and 39 percent of the value of total exports.
  - Taxes and royalties on diamonds have averaged 6½ percent of central government revenues.
  - Marine mining: Almost half of total production was recovered at sea in 2006.
- Industry structure:
  - Over 90 percent of Namibia’s diamonds are produced by Namdeb, a 50-50 joint venture between the government and DeBeers.
  - DeBeers agreed Namdeb will make 16 percent of its production available for local polishing and cutting.
  - Other diamond operators: Diamond Fields International and Samicor.
  - Other major mineral producers include: Rössing Uranium; Anglo American (Skorpion zinc mine); Namzinc (zinc refinery); Rosh Pinah Zinc; Ongopolo; AngloGold Ashanti Namibia; Okorusu Fluorspar.

### Petroleum and Gas prospects
- Kudu offshore natural gas field:
  - Proven gas reserves: 1.3 trillion cubic feet.
  - Reserve is enough to power a planned 800-megawatt electricity plant for more than 20 years.
  - Total cost of the project expected to be US$1 billion dollars.
  - Government included N$750 million (US$125 million) in MTEF for related infrastructure.
  - Nampower issued N$500 million (US$ 71 million) of a planned N$3 billion bond to pay, in part, for the Kudu project.
  - Production expected to begin in 2010 but could be delayed due to project complexity.
- Namcor:
  - National Petroleum Corporation of Namibia (Namcor) is a state-owned enterprise that imports oil.
  - While Namibia does not currently produce natural gas or oil, private sector oil companies are required to source 50 percent of their oil from Namcor; the remaining 50 percent may be imported directly.

### Institutional framework for resource exploitation
- Governance and risk:
  - Many mineral-rich economies face a “resource curse”; Namibia so far has avoided this, achieving lower-middle income status and relatively strong real income growth.
  - Effective avoidance of rent-seeking requires a rule-based, transparent legal, regulatory, and tax regime; transparent SOE operation; inclusion of mineral revenues in the budget; and good governance in public and private sectors.
- Institutional strengths:
  - Transparency International (2006): Namibia had the fifth lowest level of corruption among 45 African countries surveyed.
  - 2005 World Economic Forum’s Global Competitiveness Report: Namibia ranked 53 out of 131 countries on public institutions; judicial independence ranked 34; property rights ranked 41.
- Legal and regulatory regime:
  - IMF (2006) review: Namibia’s Minerals Act and Diamond Act are in line with international best practice and meet basic standards of the IMF’s fiscal transparency code.
  - Recommendations from the review:
    - Consider participation in the Extractive Industry Transparency Initiative (EITI).
    - Improve budget classification structure, increase public availability of information, improve audit capacity, and upgrade supervision of parastatals.
    - Minister of Mines should have authority to make regulations and narrow the scope of mineral agreements; royalty rates should be enacted into law (not left to Minister discretion).
    - Consider fiscal stability clauses in mining contracts to assure investors.
    - Mineral processing in Economic Processing Zones (EPZ) should receive customs but not income tax relief to discourage EPZ abuse.
- Legal specifics (Box IV.1):
  - Legal basis: Minerals Act of 1992; Diamond Act of 1999.
  - Minerals Act: vests all exploitation rights in the State; MME regulates and oversees mining; exclusive prospecting license up to 1000 km2 for up to three years with two two-year extensions; mining license exclusive for 25 years with possible 15 year extension; licenses awarded first come, first served; MME advised by Mining Commission and Minerals Board.
  - Diamond Act: regulates production, ownership, trade of diamonds; Section 58 permits Minister to require producers to make rough diamonds available to local cutters/polishers (never invoked); DeBeers agreed 16 percent of Namdeb’s annual production for local polishing/cutting; Section 59 allows Minister to require producers to sell up to 10 percent of annual rough production on international market for price testing; Diamond Board established.
- Transparency of mineral revenues:
  - All licensing fees, taxes and royalties go directly to the state revenue account and are included in the budget.
  - Exceptions: 3 percent royalty goes to the Diamond Valuation Fund and 0.05 percent of producer sales go to the Diamond Board Fund; both funds are not reflected in the budget.
- Tax and royalty regime:
  - Corporate profit tax:
    - Diamond companies: 55 percent corporate profit tax.
    - Non-diamond mineral companies: 37.5 percent profit tax.
    - Ordinary, non-mining corporations: 35 percent.
  - Diamond royalty: 10 percent on the value of rough diamond exports; government considering a royalty of up to 5 percent on non-diamond mining companies.
  - IMF (2006) review recommendations for royalties and taxes:
    - Keep 10 percent royalty for diamonds; set 2–3 percent royalty rate for other hard minerals.
    - Apply 10 percent diamond royalty to all diamonds produced in Namibia (not just exports).
    - Maintain corporate tax rates at 55 percent for diamond mining companies and 37.5 percent for other mining companies.
    - Make diamond and other mining agreements public.
- Public expenditure management and SOEs:
  - Mineral revenues are not separated from general revenues; all mineral-derived revenues included in central government budget.
  - Namibia has transparent legal and administrative budget framework; MTEF information available to public; procurement subject to internal and external audit; system being implemented to provide information on budget execution.
  - Public Expenditure Review (PER, 1994) findings still relevant:
    - Namibia’s tax system relatively sound; dependence on SACU receipts (~one third of total revenues).
    - Recommendations: develop VAT system, improve tax administration; improve financial control and accountability; strengthen project evaluation; increase coordination between general and development budgets; consider privatization of parastatals to reduce budget drains.
  - Program-based budgeting:
    - Current MTEF uses a program classification but expenditure data reported only by line ministry.
    - Recommendation: modernize budget classification structure and chart of accounts.
  - State ownership in resources:
    - No fully state-owned enterprises operate in the natural resources sector.
    - Government equity investments: Namdeb (50 percent), DeBeers Marine Namibia (30 percent), Rössing Uranium (3 percent).
    - Government participation limited to management; no operational involvement.
    - Mineral companies prepare audited accounts within six months of financial year close; accounts cover subsidiaries and are made publicly available annually.
    - Mining contracts, including Namdeb’s, are not available to the public.
- Summary institutional assessment:
  - Namibia has established a rule-based, predictable institutional framework for the mineral sector.
  - Technical experts recommended two small legal changes: Minerals Act should define royalty rates and limit discretionary powers of the Minister of Mines and Energy.

### Fiscal management of natural resource earnings
- Fiscal challenges identified:
  - Managing spending amid volatile receipts.
  - Ensuring long-term fiscal sustainability given finite resource earnings.
  - Setting appropriate spending levels given resource depletion.
- Volatility of resource earnings in Namibia:
  - U.S. dollar price for rough diamond exports has been broadly stable since 1995.
  - Prices for other minerals rose sharply since 2005, but output and fiscal contributions remain relatively modest.
  - Historically, export fluctuations driven by changes in output, particularly in the diamond sector.
- Comparative size and volatility:
  - The mineral sector is smaller in Namibia compared to many African economies.
  - Example: Angola — oil and gas exports averaged 65 percent of GDP and contributed fiscal revenues of 34 percent of GDP over the last ten years.
  - Table IV.1 (1997–2006) excerpts for resource sector volatility (as presented):
    - Namibia: Main mineral export — Diamonds; Mineral exports (% of GDP) — 14.7; Standard deviation of exports — 2.1; Mineral revenues (% of GDP) — 2.5; Standard deviation of revenues — 1.2
    - Botswana: Diamonds; Mineral exports (% of GDP) — 32.8; Standard deviation of exports — 4.2; Mineral revenues (% of GDP) — 20.5; Standard deviation of revenues — 3.4
    - Cameroon: Oil; Mineral exports (% of GDP) — 8.3; Standard deviation of exports — 2.0; Mineral revenues (% of GDP) — 4.8; Standard deviation of revenues — 1.3
    - Gabon: Oil; Mineral exports (% of GDP) — 27.0; Standard deviation of exports — 7.2; Mineral revenues (% of GDP) — 18.9; Standard deviation of revenues — 2.9
    - Angola: Oil; Mineral exports (% of GDP) — 64.7; Standard deviation of exports — 8.6; Mineral revenues (% of GDP) — 34.0; Standard deviation of revenues — 6.7
- Policy conclusions on fiscal arrangements:
  - No merit seen in a dedicated mineral fund to accrue mineral revenues.
  - Dutch disease does not appear to be a risk in Namibia’s case.
  - The tax regime may need review to ensure the budget benefits appropriately from recent high rents in the mineral sector, while remaining responsive to growing uranium and potential natural gas sectors.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr0882.pdf*

### 113.     Exchange rate fluctuations have been an important source of volatility in

### Exchange rate fluctuations have been an important source of volatility in Namibia

### Exchange rate and mineral revenue volatility
- The peg to the South African rand has produced significant currency movements.
- Depreciation of the rand boosted diamond taxes and royalties to 5 percent of GDP in 2002/03, before falling to 2 percent of GDP in 2004/05 as the currency strengthened.
- Currency depreciation boosts mineral incomes and overall GDP, both of which rise relative to incomes and expenditures in the non-mineral economy, strengthening the overall fiscal position to a lesser extent.

### Stabilization funds, fiscal discipline, and Namibia’s approach
- Of 31 oil producing countries examined, 21 had established stabilization funds that channel surpluses (when export prices exceed a reference price) into a fund to sustain spending when prices fall.
- Stabilization funds can be circumvented if governments borrow during periods of high mineral export prices; sound fiscal management therefore requires insulating expenditures from swings in mineral revenues and basing spending on medium-term resource and fiscal sustainability.
- Namibia does not use a specific stabilization fund. Key fiscal rules and institutions:
  - Government fiscal goal: limit public debt to 25 percent of GDP or less (prevents borrowing against future mineral receipts).
  - Use of a medium-term expenditure framework (MTEF) to develop budgets in a multi-year setting so expenditures do not excessively reflect short-term revenues.
- Practical outcome: from 1989 to 2006, increases in mineral revenues were associated, on average, with lower, not higher public spending, relative to GDP.

### Fiscal pass-through and correlations (short-term, 1990–2005)
- Table IV.2 (All original data in percent of GDP) — Correlation of mineral revenues with fiscal aggregates:
  - Correlation with Total revenues: 0.05
  - Correlation with Non-SACU revenues: 0.58
  - Correlation with Current spending: 0.00
  - Correlation with Capital spending: -0.37
  - Correlation with Fiscal balance: 0.15
- SACU revenues correlations (same column order):
  - Total revenues: 0.66
  - Non-SACU revenues: -0.41
  - Current spending: 0.39
  - Capital spending: 0.29
  - Fiscal balance: 0.07
- Practical risk: Namibia’s budget is more at risk from volatility in SACU revenues:
  - SACU revenues averaged more than 9 percent of GDP over the past ten years compared with 2-3 percent of GDP for mineral revenues.
  - A one percentage point of GDP increase in SACU revenues is correlated with a 0.68 percentage point of GDP increase in total spending.
- Conclusion: caution is needed when projecting SACU revenues and the expenditures they would finance.

### Mineral sector size, contribution, and outlook
- Current and historical shares:
  - Non-renewable natural resource sector comprises 21 percent of GDP, 57 percent of exports, and 7½ percent of government revenues.
  - Since 1990, mineral revenues have averaged just 2½ percent of GDP, compared to total public expenditures of 32 percent of GDP.
  - Mineral production contributed about one percent of GDP on average to growth since independence.
- Diamond production projections and key figures:
  - Diamond production expected to continue at about 2¼ million carats per year through the year 2010, then decline gradually to about 1.9 million carats by the year 2020 (land-based resources expected to be depleted by 2020).
  - Namdeb’s total diamond output in 2006 was 2.2 million carats (more than 90 of Namibia’s total).
  - Scenario assumption: production of 2.3 million carats out to 2012 in projections.
- Other minerals:
  - Uranium: Rössing mine life extended to 2021 due to high international prices; new uranium investments underway.
  - Skorpion zinc mine expected to remain in production to 2020.
  - Kudu gas fields development beginning in 2010–12 may offset declining production of other minerals.

### Assessment of long-run fiscal implications and the annuity of diamond revenues
- Permanent annuity value findings:
  - The permanent annuity value of Namibia’s diamonds to the budget is small—about one-half of one percent of GDP per annum.
  - Projected fiscal revenues from the diamond sector over the next decade are about 1-1½ percent of GDP, exceeding the annuity value; saving the difference (equivalent to 1 percent of GDP or less) could be justified.
  - Given the small “optimal” saving, a separate mineral fund is not warranted; the projected public saving rate of more than 5 percent of GDP encompasses this goal.
- Appendix assumptions for annuity calculations (2006 = year zero):
  - Nominal interest, i: 12.0 %
  - Real GDP growth: 5.0 %
  - Inflation: 5.5 %
  - Nominal GDP growth, g: 10.8%
- Baseline annuity result:
  - Baseline annuity value of Namibia’s diamond tax revenues: 0.40 percent of GDP per year.
- Sensitivity and scenario annuity values:
  - If (i–g) rises from historical average of 1.2 percent to 2.0 percent, annuity value rises to 0.54 percent of GDP per annum.
  - Annuity (i–g) (% of GDP):
    - 2.0% -> 0.54
    - 1.2% -> 0.40
    - 0.5% -> 0.23
  - Scenario-specific annuities:
    - Baseline: 0.40 percent of GDP
    - Optimistic: 0.48 percent of GDP (with (i–g) at 1.2 percent)
    - Pessimistic: 0.33 percent of GDP
- Policy implication from annuity analysis:
  - Annuity values are 0.6 percent of GDP or less per annum under all scenarios, compared with recent tax revenues from the diamond sector of 1½–3½ percent of GDP.
  - Government should save the difference between actual and annuity value—amounting to one percent or more of GDP per annum—to smooth revenues; this is modest and broadly consistent with actual average public saving of 1½ percent of GDP during 1990–2005.
  - Given the modest implied savings, there is little justification for separating diamond revenues from the general budget for a savings fund.

### Macroeconomic risks and overall assessment
- Dutch disease:
  - Dutch disease is a lesser concern for Namibia because mineral exports have been a moderate share of GDP (20-25 percent), much capital equipment is imported, mining accounts for about 2 percent of national employment, and fiscal revenues from mining have averaged just 2-3 percent of GDP.
- Growth volatility:
  - Mineral sector volatility has not been an excessive concern; pass-through from mineral incomes to spending has been limited, damping stop-go spending patterns.
  - Diamond sector contributions to overall GDP growth have been unpredictable but have not prevented sustained growth in the non-diamond economy.
- Government borrowing and debt:
  - Government aims to keep public debt to GDP at or below 25 percent.
  - Public debt has risen as high as 34 percent historically, but government debt remains much lower than in many other African countries.
  - External government debt measured only 5¾ percent of GDP as of June 2007.
- Overall conclusion:
  - Mineral production has had a relatively benign impact on Namibia’s growth to date; minimal impact on level and volatility of growth.
  - Namibia should be relatively immune from Dutch disease effects; prudent borrowing and fiscal rules (public debt target of 25 percent of GDP) support fiscal stability.

### Policy recommendations and priorities
- No strong case for a dedicated mineral stabilization/savings fund given:
  - Mineral revenues are relatively small compared to GDP (only 1–2 percent).
  - Projected annuity values are modest (0.6 percent of GDP or less).
- Priority fiscal and policy actions:
  - Continue to manage mineral resources wisely.
  - Examine ways to improve the tax regime for mining to help address projected declines in customs union (SACU) revenues over the medium-term.
  - Consider using mineral wealth to diversify the economy to mitigate shocks and eventual resource exhaustion.
  - Emphasize revenue administration and public expenditure management as more critical to fiscal stability than the mineral revenue regime.

*Source: IMF staff analysis in the provided chapter on Namibia’s mineral sector and fiscal implications.*

### 129.     High and persistent unemployment is one of the most pressing issues facing

### 129.     High and persistent unemployment is one of the most pressing issues facing Namibia.

### B. Unemployment Overview
- Annual GDP growth was 4.6 percent during 2000 to 2005, while the unemployment rate rose from 34.5 percent in 2000 to 36.7 percent in 2004 (broad definition).  
- Employment growth was less than 1 percent per annum during 1992–2004, while annual labor force growth was about 3 percent, causing unemployment to increase from 19 percent in 1992 to 37 percent in 2004.  
- Table V.1 (narrow definition, excluding those not looking for work) statistics:
  - Namibia, 1997: Labor Participation 53.5, Unemployment Rate 19.5
  - Namibia, 2000: Labor Participation 54.0, Unemployment Rate 20.2
  - Namibia, 2004: Labor Participation 47.9, Unemployment Rate 21.9
  - Botswana, 2006: Labor Participation 57.2, Unemployment Rate 15.3
  - Cameroon, 2001: Labor Participation 68.9, Unemployment Rate 7.5
  - Egypt, 2005: Labor Participation 49.3, Unemployment Rate 11.2
  - Lesotho, 1999: Labor Participation 64.0, Unemployment Rate 27.3
  - Mauritius, 2006: Labor Participation 65.5, Unemployment Rate 9.1
  - South Africa, 2006: Labor Participation 65.1, Unemployment Rate 25.5
  - Tunisia, 2005: Labor Participation 54.9, Unemployment Rate 14.2
- Unemployment heterogeneity (broad definition):
  - Regional range: low of 19 percent to high of 65 percent.
  - Rural unemployment: 45 percent; Urban unemployment: 29 percent.
  - Female unemployment: 43 percent; Male unemployment: 30 percent.
  - Age 20–24 unemployment: 57 percent.
  - Those with less than secondary education face unemployment rates of over 30 percent.
- Labor force composition and job search:
  - Employed: 385,329 (total labor force including discouraged workers).
  - Unemployed and Looking: 108,119.
  - Unemployed and Not Looking: 115,162.
  - Almost half of the unemployed are not seeking jobs.
  - 56 percent of those actively looking for employment have been unemployed for more than 2 years.
  - Nearly one third of employed workers experience some degree of underemployment and are interested in additional work.

### C. Contributions to High Unemployment
- Low skills
  - Compared to workers with no education, those with senior secondary education (beyond grade 10) face a 60 to 80 percent higher probability of being employed.
  - Only 20 percent of the working age population is educated beyond junior secondary level.
  - Scarcity of skilled workers results in high wage premia:
    - Skilled workers earn about 5 times the wage of the unskilled.
    - Professional and managerial workers earn about 10 times higher wages.
  - Namibia Wage Differentials (Jobs Unlimited Salary Survey, 2001–07):
    - Unskilled 1|1
    - Semi-skilled 3|3
    - Skilled 5|5
    - Highly skilled, professional 10|9
    - Highly skilled, managerial 17|12
  - Median/relative differentials:
    - Namibia differential: 5|1 (median wage of skilled to unskilled, staff estimate)
    - Latin America: 4.3|2
    - East Asia: 3.4|2
    - US: 1.8|3
- Economic structure
  - Employment trends, 1997–2004:
    - Primary sector employment declined by 3.6 percent per annum.
    - Secondary sector employment declined by 0.8 percent per annum.
    - Service sector jobs expanded by 1.7 percent per annum.
  - Sectoral notes:
    - Mining is highly capital-intensive; employment base is very small and insufficient to reduce unemployment significantly.
    - Agriculture is a large employer of low-skill workers but value-added per worker is low and employment has been declining; very low rainfall reduces comparative advantage in agriculture.
    - Manufacturing accounts for just 12–13 percent of employment and GDP.
    - Namibia’s small population (about two million) limits ability to build a manufacturing base without export market development.
  - Table V.3: Manufacturing share in GDP and merchandise exports (data for 2005 unless otherwise noted):
    - Namibia: Manufacturing, value added (% of GDP) 13; Manufactures exports (% of merchandise exports) 41 (data for 2003).
    - Botswana: 4; 86 (data for 2003).
    - Lesotho: 16; n.a.
    - South Africa: 19; 57.
    - Swaziland: 37; 76 (data for 2002).
    - China: 33; 92.
    - Indonesia: 28; 47.
    - Korea: 28; 91.
    - Thailand: 35; 77.
- Labor costs
  - Median monthly wage for a production worker in Namibia is higher than most other middle-income countries, except South Africa (Figure V.6 shows Namibia and comparators in U.S. dollars).
  - Non-wage benefits are a significant portion of labor cost.
  - New Labor Act changes to leave:
    - Current annual leave: 24 consecutive days (about 18 working days).
    - New Labor Act provides 24 working days annual leave plus 5 compassionate days.
  - Table V.4 (selected comparisons):
    - Namibia Current: GDP Per Capita (PPP) (2006) 8,600; Unemployment Rate (2004) 22; Paid Annual Leave (days) 18 (24 consecutive).
    - Namibia New Labor Act: Paid Annual Leave (days) 29 (24 working days plus 5 compassionate days).
    - South Africa: GDP Per Capita (PPP) 13,000; Unemployment Rate (2006) 26; Paid Annual Leave (days) 15.
    - Botswana: GDP Per Capita (PPP) 15,700; Unemployment Rate (2006) 24; Paid Annual Leave (days) 15.
    - Chile: GDP Per Capita (PPP) 12,800; Unemployment Rate (2006) 8; Paid Annual Leave (days) 15 (after 1 year’s service).
    - Malaysia: GDP Per Capita (PPP) 12,000; Unemployment Rate (2006) 3; Paid Annual Leave (days) 8–16 (rises with years of service).
    - Thailand: GDP Per Capita (PPP) 9,200; Unemployment Rate (2006) 2; Paid Annual Leave (days) 6 (after one year's service).
- Labor market institutions
  - High regulation and rigidities in hiring and firing deter employment.
  - Employers report difficulty hiring part-time labor and expatriate workers.
  - Lack of regulatory measures for temporary employment agencies has reduced contract jobs for unskilled and semi-skilled workers.
  - Under the 1992 Act, labor disputes were handled by District Labor Courts, leading to adversarial relations, appeals, and high incidence of strikes and lockouts; the system was criticized for low efficiency and enforcement difficulties.
  - New Labor Act changes (Box V.1):
    - Seeks to improve dispute resolution by using conciliation and arbitration instead of District Labor Courts.
    - Disputes referred to a Labor Commissioner, who appoints a conciliator and oversees conciliation and arbitration.
    - The conciliator is required to resolve the case within 30 days.
    - If conciliation fails, parties can seek arbitration by mutual agreement; in certain cases, the Labor Commissioner may require compulsory arbitration.
  - Unionization:
    - Union membership is particularly high among government employees: 57 percent.
    - 2003 Household Survey: mean hourly wage for a trade union member is about 45 percent higher than for a non-union member.
    - Unionization varies by status and occupation (Figure V.7 indicates higher unionization among government/parastatal employees and among certain occupational groups).

### D. Policies to Reduce Unemployment
- Short- and medium-term priorities:
  - Encourage faster growth in low-skill job opportunities and adopt more flexible labor market institutions to tackle unemployment in the short run.
  - Near-term job creation may require lower-skill, entry-level positions in manufacturing, tourism, and other service activities.
  - More competitive labor costs and flexible labor market institutions would help encourage investments in labor-intensive sectors.
- Long-term priorities:
  - Strengthen education and training:
    - Improve quality of education through the junior secondary level.
    - Increase proportion of students benefiting from higher secondary and tertiary education.
    - Provide continuing education and training for those in the workforce.
    - Government program: Education and Training Sector Improvement Program (ETSIP) aims to improve quality of general education, develop use of information and communication technology, and expand vocational education and training; implementation in three phases over 15 years; funding secured in May 2007 for the first phase from development partners including the World Bank.
- Policy measures to open up low-skill employment:
  - Tackle obstacles to investment and growth of labor-intensive sectors such as manufacturing and construction.
  - Relax work permit regime to permit entry by foreign workers with critical skills, which could broaden the economic base and create jobs for nationals.
  - Eliminate undue restrictions on temporary work and worker dismissals to encourage employers to increase hiring; the new Labor Act addresses dismissal procedures via expanded conciliation and arbitration.
- Public sector role:
  - Adopt a more pro-business approach within the public sector to minimize undue bureaucratic obstacles to private-sector job creation.
  - Foster this approach through training provided to the civil service in the planned National Institute of Public Administration and Management, scheduled for opening in 2009.

*Source: _cr0882 - 129.     High and persistent unemployment is one of the most pressing issues facing (IMF staff report content).*

### REFERENCES

### _cr0882 - REFERENCES

### References cited
- Avalos, Antonio and Andreas Savvides, “On the Determinants of the Wage Differential in Latin America and East Asia: Openness, Technology Transfer and Labor Supply,” LAEBA Working Paper No. 19, Inter-American Development Bank, October 2003.
- Banerjee, Abhijit, Sebastian Galiani, Jin Levinsohn, and Ingrid Woolard, “Why Has Unemployment Risen in the New South Africa,” NBER Working Paper No. 13167, June 2007.
- Fox, Louise and Melissa Sekkel, “Work in Progress: Job Creation and the Quality of Growth in Africa,” World Bank discussion paper, November 2006.
- Marope, Mmantsetsa, “Namibia Human Capital and Knowledge Development for Economic Growth with Equity,” World Bank Africa Region Human Development Working Paper Series 84, February 2005.
- Murphy, Kevin and Finis Welch, “Wage Differentials in the 1990s: Is the Glass Half-full or Half-empty?”, in The Causes and Consequences of Increasing Inequality, edited by Finis Welch, University of Chicago Press, 2001, pp. 341-64.
- Namibia Labor Force Survey 1997, 2000, 2004
- Rodrik, Dani, “Understanding South Africa’s Economic Puzzles,” NBER Working Paper No. 12565, October 2006.
- The Wage Bargaining Report 2004, 2005.

### National accounts and sector composition (selected figures)
- GDP at market prices (2001–2006, In millions of Namibia dollars):
  - 2001: 27,686
  - 2002: 32,908
  - 2003: 33,842
  - 2004: 36,476
  - 2005: 39,711
  - 2006: 46,971
- GDP at factor cost (2001–2006, In millions of Namibia dollars):
  - 2001: 25,192; 2002: 29,878; 2003: 30,879; 2004: 32,680; 2005: 35,581; 2006: 42,367
- GNI at market prices (2001–2006, In millions of Namibia dollars):
  - 2001: 27,677; 2002: 33,264; 2003: 35,574; 2004: 37,035; 2005: 38,996; 2006: 46,482
- Per capita (current market prices):
  - Per capita GDP: 2001: 14,346; 2002: 16,789; 2003: 17,041; 2004: 18,154; 2005: 19,550; 2006: 22,934
  - Per capita GNI: 2001: 15,887; 2002: 18,447; 2003: 19,658; 2004: 20,574; 2005: 21,296; 2006: 25,852
- Sector shares of GDP at current prices (percent of GDP, selected sectors):
  - Primary industries (subtotal): 2001: 22.6; 2002: 23.9; 2003: 19.3; 2004: 18.9; 2005: 19.4; 2006: 22.1
  - Secondary industries (subtotal): 2001: 14.5; 2002: 14.8; 2003: 17.4; 2004: 17.3; 2005: 16.7; 2006: 18.4
  - Tertiary industries (subtotal): 2001: 52.9; 2002: 51.7; 2003: 55.4; 2004: 54.0; 2005: 54.0; 2006: 50.4
  - Diamond mining share: 2001: 10.3; 2002: 10.4; 2003: 7.8; 2004: 8.4; 2005: 7.0; 2006: 8.6
  - Finance, real estate, and business services: 2001: 11.3; 2002: 10.8; 2003: 11.7; 2004: 11.9; 2005: 12.0; 2006: 15.1

### Real growth and price indicators
- GDP at constant 1995 prices (2001–2006, In millions of Namibia dollars):
  - 2001: 15,462; 2002: 16,494; 2003: 17,069; 2004: 18,201; 2005: 19,077; 2006: 19,854
- GDP growth at constant 1995 prices (annual percentage change):
  - 2001: 2.4; 2002: 6.7; 2003: 3.5; 2004: 6.6; 2005: 4.8; 2006: 4.1
- GDP deflator (2001 = 179 in 2001? presented as): 2001: 179; 2002: 200; 2003: 198; 2004: 201; 2005: 208; 2006: 237
- National Consumer Price Index (NCPI, Index December 2001=100): selected annual averages and inflation:
  - 2005 average All items: 121.7; 12 month inflation: 2.3
  - 2006 average All items: 126.1; 12 month inflation: 5.1
  - 2007 (through October) All items: October: 140.4; 12 month inflation October: 6.6

### Expenditure, savings, and external accounts
- Expenditure on GDP at market prices (2001–2006, In millions of Namibia dollars):
  - Expenditure on GDP: 2001: 27,686; 2002: 32,908; 2003: 33,842; 2004: 36,496; 2005: 39,711; 2006: 46,971
  - Final consumption expenditure (total): 2001: 23,949; 2002: 26,981; 2003: 27,766; 2004: 30,059; 2005: 30,617; 2006: 33,758
  - Gross capital formation: 2001: 6,073; 2002: 6,964; 2003: 9,867; 2004: 9,190; 2005: 9,727; 2006: 12,235
- Net exports (2001–2006, In millions of Namibia dollars):
  - 2001: -1,780; 2002: -646; 2003: -1,221; 2004: -2,235; 2005: -1,360; 2006: -142
- Balance of payments (current account and components, 2001–2006, In millions of U.S. dollars):
  - Current account: 2001: 59.7; 2002: 115.0; 2003: 299.9; 2004: 461.7; 2005: 344.4; 2006: 1,106.1
  - Trade balance: 2001: -198.9; 2002: -207.6; 2003: -460.2; 2004: -283.6; 2005: -265.3; 2006: 94.8
  - Exports, f.o.b. (US$ millions): 2001: 1,142.4; 2002: 1,072.4; 2003: 1,250.9; 2004: 1,823.4; 2005: 2,066.7; 2006: 2,652.3
  - Imports, f.o.b. (US$ millions): 2001: -1,341.3; 2002: -1,280.0; 2003: -1,711.1; 2004: -2,107.0; 2005: -2,331.9; 2006: -2,557.5
  - Current transfers (US$ millions): 2001: 346.7; 2002: 275.3; 2003: 458.3; 2004: 667.3; 2005: 669.7; 2006: 949.9
  - Of current transfers, Government (net) (US$ millions): 2001: 333.7; 2002: 264.5; 2003: 437.3; 2004: 644.8; 2005: 649.0; 2006: 927.1
  - SACU receipts (US$ millions): 2001: 313.9; 2002: 248.0; 2003: 386.8; 2004: 606.8; 2005: 650.1; 2006: 893.9
- International reserves (end-of-period, US$ millions, gross foreign assets of Bank of Namibia):
  - 2001: 224.0; 2002: 336.2; 2003: 318.9; 2004: 352.7; 2005: 315.9; 2006: 512.7
  - In months of imports of goods and services: 2001: 1.7; 2002: 2.7; 2003: 1.9; 2004: 1.7; 2005: 1.4; 2006: 2.1

### Exports and imports (composition and partners)
- Merchandise exports, f.o.b. (US$ millions):
  - Total exports: 2001: 1,142.4; 2002: 1,072.4; 2003: 1,250.9; 2004: 1,823.4; 2005: 2,066.7; 2006: 2,652.3; 2007 (First Half): 1,341.3
  - Diamonds (US$ millions): 2001: 524.1; 2002: 533.3; 2003: 510.9; 2004: 824.5; 2005: 848.3; 2006: 1,083.8; 2007 H1: 469.9
  - Other minerals (US$ millions): 2001: 194.4; 2002: 200.3; 2003: 182.6; 2004: 227.5; 2005: 275.0; 2006: 474.7; 2007 H1: 338.6
  - Fish (US$ millions): 2001: 157.4; 2002: 149.8; 2003: 229.5; 2004: 178.7; 2005: 155.9; 2006: 204.8; 2007 H1: 146.0
- Merchandise imports, c.i.f. (US$ millions) and main categories (2001–2006):
  - Total imports, c.i.f.: 2001: 1,421.3; 2002: 1,397.8; 2003: 2,334.2; 2004: 2,407.6; 2005: 2,524.8; 2006: 2,815.9
  - Machinery and electrical goods (US$ millions): 2001: 281.8; 2002: 276.4; 2003: 452.4; 2004: 465.4; 2005: 468.6; 2006: 576.9
  - Vehicles and transport equipment (US$ millions): 2001: 168.2; 2002: 142.0; 2003: 264.0; 2004: 351.8; 2005: 388.2; 2006: 423.6
- Major trade partners (selected, exports by destination, In millions of Namibia dollars, 2001–2006):
  - South Africa exports (2001–2006): 2,471.7; 3,396.8; 3,202.8; 4,055.5; 4,864.3; 5,668.5
  - United Kingdom exports (2001–2006): 4,103.4; 3,281.7; 2,641.9; 3,407.3; 3,274.3; 5,877.7
  - Angola exports (2001–2006): 603.0; 1,944.0; 3,152.2; 1,523.4; 1,145.3; 1,309.9

### Fiscal accounts and public debt (central government)
- Central government: Revenue and grants (fiscal years 2001/02–2006/07, In millions of Namibia dollars):
  - Revenue and grants: 2001/02: 8,960; 2002/03: 10,469; 2003/04: 9,754; 2004/05: 11,388; 2005/06: 13,075; 2006/07: 16,893
  - Tax revenue: 2001/02: 8,054; 2002/03: 9,196; 2003/04: 8,633; 2004/05: 10,358; 2005/06: 11,887; 2006/07: 15,734
  - SACU receipts (international taxes): 2001/02: 2,641; 2002/03: 2,597; 2003/04: 3,036; 2004/05: 4,207; 2005/06: 3,892; 2006/07: 6,698
- Central government expenditures and balances (2001/02–2006/07, In millions of Namibia dollars):
  - Expenditures: 2001/02: 10,256; 2002/03: 11,573; 2003/04: 12,335; 2004/05: 12,640; 2005/06: 13,279; 2006/07: 15,243
  - Current expenditure (2001/02–2006/07): 8,717; 9,482; 10,387; 10,684; 11,614; 12,512
  - Personnel (2001/02–2006/07): 4,326; 4,709; 5,117; 5,446; 5,889; 6,213
  - Overall balance (including externally financed project spending): 2001/02: -1,296; 2002/03: -1,104; 2003/04: -2,581; 2004/05: -1,253; 2005/06: -204; 2006/07: 1,650
  - Primary balance (2001/02–2006/07): -709; -280; -1,716; -253; 958; 2,912
- Central government debt stocks (end of fiscal year, In millions of Namibia dollars):
  - Total government debt: 2001/02: 7,507; 2002/03: 7,924; 2003/04: 10,213; 2004/05: 12,559; 2005/06: 12,533; 2006/07: 13,638
  - Domestic debt: 2001/02: 5,947; 2002/03: 6,712; 2003/04: 8,606; 2004/05: 10,543; 2005/06: 10,690; 2006/07: 10,928
  - Foreign debt: 2001/02: 1,561; 2002/03: 1,212; 2003/04: 1,607; 2004/05: 2,016; 2005/06: 1,843; 2006/07: 2,710
  - Government and government-guaranteed debt: 2001/02: 10,817; 2002/03: 11,151; 2003/04: 13,416; 2004/05: 14,996; 2005/06: 16,038; 2006/07: 17,406
  - Government debt (percent of GDP): 2001/02: 25.9; 2002/03: 23.9; 2003/04: 29.6; 2004/05: 33.7; 2005/06: 30.2; 2006/07: 28.2

### Monetary and financial sector
- Bank of Namibia summary accounts (selected positions, In millions of Namibia dollars):
  - Net Foreign Assets (selected dates): Dec. 2003: 2,110.3; Dec. 2004: 1,977.3; Dec. 2005: 1,983.9; Dec. 2006: 2,457.7; Dec. 2007 (Dec. shown in table series): 3,164.3; Sep. 2007: 5,868.4
  - Monetary base (selected): 2003 Dec.: 1,172.9; 2004 Dec.: 1,238.6; 2005 Dec.: 1,372.5; 2006 Dec.: 1,270.0; 2007 Dec.: 1,532.4
  - Currency in circulation (selected): 2003 Dec.: 918.9; 2004 Dec.: 945.8; 2005 Dec.: 1,026.8; 2006 Dec.: 922.8; 2007 Dec.: 1,151.4
- Monetary Survey (Broad Money M2, In millions of Namibia dollars, selected):
  - 2003 Dec.: 13,626.7; 2004 Dec.: 15,828.9; 2005 Dec.: 17,370.2; 2006 Dec.: 18,754.2; 2007 Dec. (series through Sep): 22,589.5; Sep. 2007: 25,701.1
  - Credit to private sector (selected): 2003 Dec.: 16,676.3; 2004 Dec.: 19,918.7; 2005 Dec.: 23,922.4; 2006 Dec.: 24,748.2; Sep. 2007: 30,040.3
- Interest rates (annual averages, percent):
  - Bank rate (end of period) In Namibia: 2001: 9.25; 2002: 12.75; 2003: 7.75; 2004: 7.50; 2005: 7.00; 2006: 9.00; 2007 (Oct.): 10.50
  - Treasury bill rate in Namibia (average tender rate for 91-day bills): 2001: 9.29; 2002: 11.00; 2003: 10.51; 2004: 7.78; 2005: 7.09; 2006: 7.26; 2007: 9.16
  - Commercial bank deposit rate in Namibia (weighted averages): 2001: 6.79; 2002: 7.81; 2003: 8.76; 2004: 6.35; 2005: 6.24; 2006: 6.30; 2007: 7.95
  - Commercial bank lending rate in Namibia: 2001: 14.53; 2002: 13.84; 2003: 14.70; 2004: 11.39; 2005: 10.61; 2006: 11.18; 2007: 13.56
- Selected financial market indicators:
  - Namibia Stock Exchange market capitalization (millions of Namibia dollars, year-end): 2001: 511,651; 2002: 386,617; 2003: 460,315; 2004: 573,878; 2005: 769,585; 2006: 112,542; 2007 (Oct., partial): 131,202
  - Index (year-end): 2001: 392; 2002: 305; 2003: 347; 2004: 426; 2005: 582; 2006: 828; 2007 (Oct.): 1,016

### Mineral and commodity exports (selected)
- Mineral exports (N$ Millions, totals and major minerals, 2001–2007 First Half):
  - TOTAL mineral exports (N$ millions): 2001: 6,181.4; 2002: 7,714.8; 2003: 5,245.9; 2004: 6,785.5; 2005: 7,146.8; 2006: 10,546.2; 2007 H1: 5,793.1
  - Diamonds (N$ millions): 2001: 4,508.9; 2002: 5,608.3; 2003: 3,864.6; 2004: 5,317.9; 2005: 5,397.3; 2006: 7,334.1; 2007 H1: 3,366.8
  - Uranium (N$ millions): 2001: 998.5; 2002: 1,206.5; 2003: 592.2; 2004: 750.3; 2005: 926.3; 2006: 1,554.8; 2007 H1: 1,535.1
- Mineral exports in US$ millions (selected):
  - Total (US$ millions): 2001: 718.5; 2002: 733.6; 2003: 693.5; 2004: 1,052.0; 2005: 1,123.3; 2006: 1,558.4; 2007 H1: 808.5
  - Diamonds (US$ millions): 2001: 524.1; 2002: 533.3; 2003: 510.9; 2004: 824.5; 2005: 848.3; 2006: 1,083.8; 2007 H1: 469.9

### Exchange rates and external price indices
- Official exchange rate (Namibia dollars per U.S. dollar, period average): 2001: 8.60; 2002: 10.52; 2003: 7.56; 2004: 6.45; 2005: 6.36; 2006: 6.77
- Effective exchange rate series (period averages, 2000 =100) presented for nominal and real indexes and currencies including Euro, U.S. dollar, Pula, and Rand (table entries for 1998–2007).

*Source: _cr0882 - REFERENCES (PDF): tables and reference list as provided.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr0882.pdf_