IMF Executive Board Concludes 2022 Article IV Consultation with Namibia
December 8, 2022
Washington, DC : On December 7, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Namibia.
The Namibian economy is gradually recovering from the impact of the COVID-19 pandemic. After a sharp contraction in 2020, real GDP growth reached 2.7 percent in 2021 and the recovery strengthened in the first half of 2022. Mining activity has rebounded while manufacturing and tertiary sector activities are gradually recovering. Inflationary pressures have risen as higher international oil and food prices, due to the repercussions of Russia’s war in Ukraine, were passed through to the domestic economy.
Real GDP growth is expected at 3 percent in 2022 and 3.2 percent in 2023, supported by robust diamond, gold, and uranium production and a gradual recovery in tourism and manufacturing. Average inflation would reach about 6 ½ percent in 2022 and start to moderate in 2023. The current account deficit is expected to remain large in 2022, reflecting higher international food and fuel prices, a sharp decline in SACU receipts and large FDI-financed imports in oil and gas. The fiscal deficit would narrow in FY22/23, supported by fiscal consolidation measures to mobilize additional revenues and increase spending efficiency. Deteriorating global conditions could adversely impact Namibia’s short-term outlook and worsen external and fiscal imbalances.
Executive Board Assessment [2]
While noting that Namibia is expected to continue its gradual recovery, Directors highlighted the risks from deteriorating global economic conditions. They called for continued orientation of macroeconomic policies toward preserving macroeconomic stability, while fostering inclusive growth to reduce high unemployment and inequality.
Directors welcomed the continued progress on medium-term fiscal consolidation and the adoption of measures to protect the most vulnerable from higher food and fuel prices and food insecurity. They stressed that the planned fiscal adjustment measures are pivotal to preserve debt sustainability and strengthen the external position. Directors underscored the need to advance planned measures to contain the wage bill, enhance tax collection and enforcement, reform state-owned enterprises, and strengthen public financial management. They called for strong governance and management of the new sovereign wealth fund to mitigate related risks and generally supported delaying its operationalization until public debt declines and reserves strengthen.
Directors highlighted that maintaining the policy rate broadly aligned with the South African Reserve Bank's rate and preserving adequate reserves is important to anchor inflation and preserve the currency peg. They encouraged further efforts to strengthen financial sector resilience and mitigate macro-financial risks. While welcoming the progress on implementing the 2018 FSSA recommendations, Directors emphasized the need to expand macroprudential tools and operationalize the central bank’s emergency lending assistance. They called for swift implementation of the action plan to strengthen the AML/CFT framework.
Directors emphasized the need to enhance inclusive growth by advancing structural reforms to foster diversification and increase productivity. Noting the importance of supporting private sector-led growth and job creation, Directors recommended taking steps to improve the business environment and increase access to finance and continuing to strengthen governance. Directors called for strong efforts to address food insecurity, including through measures to strengthen climate resilience in the agricultural sector.
[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm
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Table 1. Namibia: Selected Economic Indicators, 2018–27 |
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