IMF Staff Completes 2019 Article IV Mission to Namibia

IMF News, June 5, 2019

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Press Release No. 19/200 dated June 5, 2019.
An IMF staff team led by Mr. Geremia Palomba, IMF Mission Chief for Namibia, visited Windhoek during May 22-June 4, 2019 to conduct the 2019 Article IV Consultation with Namibia.
End-of-Mission press releases convey preliminary findings; the views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

The economy is undergoing a rebalancing process and has been contracting.
In 2018, real GDP declined for a second consecutive year.
IMF staff expect the economy will recover only gradually:
- Growth is projected to remain mildly negative in 2019.
- Growth is expected to turn positive in 2020.
- Growth is expected to gradually converge to a long-term rate of about 3 percent.
Factors weighing on near-term recovery:
- A poor rain season.
- Reduced diamond production.
Downside risks:
- Lower than expected Southern African Customs Union (SACU) revenue.
- Fiscal slippages that would undermine the government’s efforts to stabilize public debt dynamics.

Key challenge: identify specific policies to fully deliver the authorities’ fiscal consolidation plans to stabilize public debt dynamics.
The authorities’ consolidation plans strike a right balance between stabilizing public debt and supporting the economy, but several actions are needed to deliver this outcome.
Immediate priorities:
- Immediate action is needed to contain the FY19/20 fiscal deficit within the budget limits as spending pressures are rising.
- Policies to deliver the fiscal adjustment planned for the next two years also need to be fully identified.
Policy focus areas:
- Rationalizing large spending items, particularly wage costs and transfers to public entities.
- Combining expenditure and revenue measures that support long-term growth, while protecting and improving social assistance programs.
Fiscal governance and risk management:
- Rationalizing public entities, strengthening revenue administration, and improving budget and expenditures controls is critical to delivering adjustment plans.
- Avoiding excessive risk-taking from off-budget operations will strengthen the credibility of the adjustment and reduce fiscal risk.
- The mission welcomes the authorities’ intention to develop restructuring plans for key loss-making public enterprises.

Structural reforms are needed to strengthen productivity and competitiveness, lift business confidence, and boost the long-term growth potential of the economy.
Recommended reform priorities:
- Reduce policy uncertainty.
- Streamline business regulations.
- Remove obstacles that contribute to high electricity and transportation costs, including reforming public enterprises operating in these sectors.
- Establish a well-structured wage policy for the public sector to better align wage dynamics and productivity.
- Over time, remove obstacles to exports, address the shortage of well-educated and skilled workers, and foster the adoption of new technologies.

Despite the economic slowdown, the financial sector remains sound.
Authorities are taking steps to curb possible risks arising from structural vulnerabilities in the sector and advance key reforms:
- Strengthen banks’ asset classification.
- Tighten concentration risk regulations.
- Improve the macroprudential policy framework.
- Upgrade the non-bank regulatory and supervisory frameworks and introduce a resolution regime.
These steps will help manage macro-financial risks and address structural vulnerabilities in the sector.

The mission thanked the authorities for their hospitality and productive discussions.

IMF Communications Department