IMF Staff Completes 2025 Article IV Mission to Namibia

IMF News, March 7, 2025

Source details

Real GDP growth:
- Estimated growth in 2024: 3.5 percent.
- Projected growth in 2025: 4.0 percent.
- Expected medium-term average: about 3 percent.
Drivers and shocks:
- 2023/24 drought depressed agricultural production and caused wide-spread food insecurity.
- Weak global demand for diamonds contributed to slower growth in 2024.
- Oil and gas exploration raise the prospect of boosting national income but entail large exploration-related imports.

Unemployment:
- Reported at 36.9 percent in the latest (2023) labor force survey.
Food insecurity and climate:
- Nearly half of Namibia’s population faced high levels of acute food insecurity during the recent drought.
- Public support for those continuing to experience food insecurity should continue.
- Government programs to increase resilience against climate shocks remain vital.

Inflation:
- Eased below the midpoint of the central bank’s target range (3–6 percent).
- Expected to remain at about 4 percent in 2025.
- Outlook subject to external price shocks.
Bank of Namibia (BoN) policy:
- BoN lowered its policy rate by a cumulative 100 bps in four steps between July 2024 and February 2025.
- As inflation normalized, BoN maintained its policy rate at 50–75 bps below the policy rate set by the South African Reserve Bank (SARB), while indicating intention to close the rate differential over the medium-term.
- Recommendation: BoN should stand ready to reduce the interest rate differential earlier—if warranted by macroeconomic conditions—to safeguard the currency peg and ensure adequate reserve coverage.
Credit:
- Credit growth subdued, growing at 4.1 percent year-on-year as of January 2025, though it rebounded in the last quarter of 2024.

Current account:
- Current account deficit increased from 14.8 percent of GDP in 2023 to an estimated 16.0 percent of GDP in 2024.
- Expected to remain high due to oil and gas exploration-related imports (largely financed by FDI).
Reserves:
- Gross international reserves covered 4.5 months of imports in 2024.
- Reserves are expected to stay above 3 months of imports in 2025, with the planned repayment of the Eurobond reducing their level and rebound gradually in the medium term.

Fiscal balance:
- Fiscal deficit expected to widen from 2.4 percent of GDP in FY23/24 to 3.0 percent of GDP in FY24/25.
- Drivers: public wage bill increase, higher drought relief, and capital expenditure more than offset higher revenues (record-high SACU transfers and strong domestic tax collection).
Fiscal risks and priorities:
- Volatility of Southern African Customs Union (SACU) revenues and a sharp decline in revenues from the diamond sector underscore the need for prudent fiscal management.
- Maintaining fiscal discipline is crucial to balance supporting growth and job creation while ensuring public debt remains sustainable.
Key fiscal measures recommended:
- Exercise restraint over the wage bill.
- Calibrate capital spending to ensure a primary surplus in FY2025/26, as envisaged in the recent medium-term expenditure framework.
- Implement comprehensive civil service reform accompanied by digitalization to facilitate fiscal consolidation and enhance service delivery.
- Raise the efficiency of public investment and focus it on addressing key infrastructure gaps (energy, transport, and water) to improve growth prospects and foster resilience and job creation.

Macroprudential framework:
- Continued enhancement of the macroprudential toolkit is key for strengthening capacity to monitor macro-financial risks and safeguard financial stability.
FATF Grey List:
- Efforts to expedite Namibia’s exit from the Financial Action Task Force (FATF) Grey List should continue.

Policy recommendations to foster private sector job creation and inclusion:
- Improve the business climate, including tax and regulatory stability.
- Reduce the cost of doing business by streamlining visa processes, reducing regulatory barriers to starting a business, and liberalizing land use policies.
- Address skill gaps and improve critical infrastructure.
- Strengthen social protection and implement active labor market policies to reduce unemployment and inequality.

Mission:
- IMF staff team led by Mr. Jaroslaw Wieczorek visited Windhoek during February 25‒March 10, 2025, for the 2025 Article IV Consultation with Namibia.
Statement highlights:
- The mission thanked the authorities for their excellent collaboration and warm hospitality.
- Views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on preliminary findings, staff will prepare a report for the IMF's Executive Board.

Press Release No. 25/055 — IMF Staff Completes 2025 Article IV Mission to Namibia (March 7, 2025).