IMF Executive Board Concludes 2019 Article IV Consultation with Namibia
IMF News, September 13, 2019
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- Published: September 13, 2019
Summary of recent developments and assessment
- The Executive Board concluded the Article IV consultation on August 30, 2019, and considered and endorsed the staff appraisal without a meeting.
- During 2010–15, Namibia experienced a period of exceptional growth but macroeconomic imbalances rose, resulting in public debt sharply increasing and international reserves falling below adequate levels.
- Rapid credit growth fueled fast-rising house prices and elevated private sector indebtedness; robust growth masked slowing productivity growth and declining external competitiveness. Income inequality and unemployment remained very high.
- With temporary stimuli ended, the economy is rebalancing while the government is implementing significant fiscal consolidation.
- Real GDP declined in 2017 and, at a slower pace, in 2018. The current account deficit has narrowed significantly despite a decline in SACU receipts. Credit to the private sector slowed and the house price real growth rate turned negative.
- Public debt remains on a rising path, and government’s growth financing needs are elevated. International reserves improved, although remain below adequate levels. The financial sector has been resilient but banks’ asset quality has deteriorated with the slowdown.
Outlook and risks
- Projected growth path:
- Real GDP: projected to mildly contract in 2019 before gradually recovering; absent structural reforms, growth is expected to converge to a long-term level of about 3 percent.
- Public debt and external position:
- Pending further actions, public debt would continue rising, although at a more moderate pace than in the past.
- Current account deficit expected to stabilize at around 4 percent of GDP; international reserves coverage would gradually decline.
- Downside risks:
- Possible fiscal slippages that could trigger further debt increases.
- Declines in SACU revenue.
- Low demand for key exports due to rising trade tensions and weaker global growth.
- Macro-financial feedback loops could amplify shocks given a highly interconnected financial sector.
Executive Board Assessment — policy priorities and required measures
- Fiscal consolidation:
- Short term: staff assess that an additional ¾–1 percent of GDP in measures is required to contain the FY19/20 fiscal deficit within the budget target.
- Policies to deliver the adjustment planned for the next two years (about 2 percent of GDP) need to be fully defined.
- Measures should combine spending reductions and selected revenue increases while protecting the poor.
- Specific fiscal measures recommended:
- Continue containing salary indexation and new hires, applying the policy to all public entities.
- Rationalize transfers to public entities and enterprises.
- Expand tax bases by reducing exemptions and special tax regimes.
- Widen coverage of children’s grants, better target housing programs, and adopt a more progressive personal income tax to protect the poor and strengthen distributive role of fiscal policy.
- The Bank of Namibia (BoN) should keep the policy rate broadly in line with the SARB’s rate and maintain the peg.
- Fiscal governance and credibility:
- Rationalize public enterprises and extrabudgetary entities.
- Strengthen revenue administration, and improve budget and expenditure controls.
- Control off-budget financing of investment projects, develop a fiscal risks framework, and publish a risks statement.
- A Fund’s medium-term capacity development strategy has been developed in consultation with the authorities to support improvements.
Structural reforms to boost growth and competitiveness
- Priorities to accelerate productivity and long-term growth:
- Streamline business regulations (e.g., lowering regulatory compliance costs).
- Reduce high electricity and transportation costs (e.g., reforming public enterprises operating in these sectors).
- Contain public sector salary dynamics to better align productivity and wage dynamics.
- Avoid regulations hampering domestic competition (e.g., preferential procurement rules).
- Reduce non-tariff obstacles to exports (e.g., quotas, imports ban, SACU-related restrictions).
- Address shortages of well-educated and skilled workers through better access and quality of higher education, vocational and on-the-job training programs.
- Foster adoption of new technologies (e.g., better broadband services).
- The potential gains from improvements in the above areas could be large.
Financial sector oversight and macroprudential policy
- Despite a recent increase in NPLs, the financial sector remains sound.
- With a large non-bank financial industry, planned legislative changes to address regulatory gaps (e.g., NAMFISA, Financial Institutions and Market bills) should be adopted expeditiously.
- Revive efforts to introduce risk-based supervision.
- BoN to have an explicit macroprudential mandate to regulate a deeply interconnected financial sector; strengthen coordination between BoN, NAMFISA and the Ministry of Finance, including creation of the planned Financial Stability Committee.
- Complement macroprudential toolkit with DSTI limits and other measures to manage risks from the highly leveraged private sector.
- Step up efforts to develop a full crisis management and resolution framework, including granting BoN and NAMFISA full resolution powers of financial institutions, and operationalizing emergency lending assistance.
Key statistics and projections (selected, 2015–24)
- GDP at constant prices (percentage change):
- 2015: 6.1
- 2016: 1.1
- 2017: -0.9
- 2018: -0.1
- 2019 (Prel): -0.2
- 2020 (Proj): 1.6
- 2021 (Proj): 2.4
- 2022 (Proj): 3.2
- 2023 (Proj): 3.9
- 2024 (Proj): 3.0
- GDP deflator:
- 2015: 2.0
- 2016: 9.4
- 2017: 9.7
- 2018: 6.5
- 2019 (Prel): 4.4
- 2020 (Proj): 5.2
- 2021 (Proj): 5.3
- 2022 (Proj): 5.6
- GDP at market prices (N$ billions):
- 2015: 150
- 2016: 166
- 2017: 181
- 2018: 192
- 2019 (Prel): 200
- 2020 (Proj): 214
- 2021 (Proj): 231
- 2022 (Proj): 251
- 2023 (Proj): 275
- 2024 (Proj): 298
- GDP per capita (US$, constant 2000 exchange rate):
- 2015: 9,489
- 2016: 10,298
- 2017: 10,994
- 2018: 11,478
- 2019 (Prel): 11,745
- 2020 (Proj): 12,313
- 2021 (Proj): 13,017
- 2022 (Proj): 13,886
- 2023 (Proj): 14,951
- 2024 (Proj): 15,909
- Consumer prices (end of period):
- 2015: 3.7
- 2016: 7.3
- 2017: 5.1
- 2018: 4.8
- 2019 (Prel): 5.5
- Exports (US$, percentage change):
- 2015: -15.7
- 2016: -2.4
- 2017: 19.0
- 2018: 12.2
- 2019 (Prel): 0.4
- 2020 (Proj): 7.1
- 2021 (Proj): 4.6
- 2022 (Proj): 6.7
- 2023 (Proj): 4.3
- Imports (US$, percentage change):
- 2015: -5.4
- 2016: -12.8
- 2017: -1.0
- 2018: 4.0
- 2019 (Prel): 6.6
- Investment and savings (percent of GDP):
- Investment:
- 2015: 31.5
- 2016: 23.5
- 2017: 16.2
- 2018: 12.5
- 2019 (Prel): 17.1
- 2020 (Proj): 18.0
- 2021 (Proj): 18.5
- 2022 (Proj): 18.9
- Public investment (percent of GDP):
- 2015: 8.2
- 2016: 7.8
- 2017: 4.1
- 2018: 6.0
- Private investment (percent of GDP):
- 2015: 24.4
- 2016: 8.5
- 2017: 11.5
- 2018: 12.0
- 2019 (Prel): 13.0
- Central government budget (fiscal year)
- Revenue and grants (percent of GDP):
- 2015: 33.9
- 2016: 30.0
- 2017: 32.0
- 2018: 28.7
- 2019 (Prel): 28.9
- 2020 (Proj): 30.8
- 2021 (Proj): 29.8
- Of which: SACU receipts:
- 2015: 11.3
- 2016: 8.3
- 2017: 8.9
- 2018: 9.3
- 2019 (Prel): 10.9
- Expenditure and net lending (percent of GDP):
- 2015: 42.4
- 2016: 38.9
- 2017: 35.5
- 2018: 34.1
- 2019 (Prel): 35.2
- 2020 (Proj): 36.0
- 2021 (Proj): 36.2
- 2022 (Proj): 36.3
- 2023 (Proj): 36.4
- Overall balance (percent of GDP):
- 2015: -8.5
- 2016: -9.0
- 2017: -3.4
- 2018: -5.6
- 2019 (Prel): -4.4
- 2020 (Proj): -5.5
- 2021 (Proj): -5.7
- Public debt/GDP:
- 2015: 39.9
- 2016: 42.6
- 2017: 41.0
- 2018: 45.8
- 2019 (Prel): 49.2
- 2020 (Proj): 50.9
- 2021 (Proj): 51.4
- 2022 (Proj): 53.0
- 2023 (Proj): 54.3
- 2024 (Proj): 56.0
- Of which: domestic:
- 2015: 22.1
- 2016: 27.8
- 2017: 27.1
- 2018: 29.0
- 2019 (Prel): 34.2
- 2020 (Proj): 36.7
- 2021 (Proj): 42.3
- 2022 (Proj): 44.8
- Gross public and publicly guaranteed debt/GDP:
- 2015: 44.5
- 2016: 47.8
- 2017: 46.9
- 2018: 51.8
- 2019 (Prel): 55.8
- 2020 (Proj): 58.1
- 2021 (Proj): 59.2
- 2022 (Proj): 61.4
- 2023 (Proj): 63.3
- 2024 (Proj): 65.3
- Current account balance (including official grants):
- 2015: -13.5
- 2016: -15.4
- 2017: -4.1
- 2018: -2.3
- 2019 (Prel): -3.8
- 2020 (Proj): -4.2
- 2021 (Proj): -4.5
- External public debt (including IMF):
- 2015: 17.8
- 2016: 13.9
- 2017: 16.8
- 2018: 17.2
- 2019 (Prel): 16.7
- 2020 (Proj): 13.1
- 2021 (Proj): 12.1
- Gross official reserves (US$ millions):
- 2015: 1,580
- 2016: 1,791
- 2017: 2,216
- 2018: 2,156
- 2019 (Prel): 2,407
- 2020 (Proj): 2,740
- 2021 (Proj): 2,573
- 2022 (Proj): 2,489
- 2023 (Proj): 2,515
- 2024 (Proj): 2,572
- Percent of GDP:
- 2015: 16.4
- 2016: 15.1
- 2017: 17.0
- 2018: 18.6
- 2019 (Prel): 15.3
- 2020 (Proj): 14.1
- Months of imports of goods and services:
- 2015: 3.5
- 2016: 4.2
- 2017: 4.5
- 2018: 3.4
- External debt/GDP:
- 2015: 47.2
- 2016: 58.4
- 2017: 61.7
- 2018: 62.5
- 2019 (Prel): 60.7
- 2020 (Proj): 59.1
- 2021 (Proj): 57.9
- 2022 (Proj): 57.7
- Memorandum item: Population (in million):
- 2015: 2.3
- 2016: 2.5
- 2017: 2.7
Press Release No. 19/331, September 13, 2019, IMF Communications Department.
