Press Release No. 15/319

Press Release: IMF Staff Completes 2015 Article IV Mission to Namibia

July 6, 2015

A mission of the International Monetary Fund (IMF) led by Jiro Honda visited Namibia during June 24‒July 7, 2015 to conduct the 2015 Article IV consultation with Namibia. The mission met with the Prime Minister, Hon. Saara Kuugongelwa-Amadhila; Minister of Finance, Hon. Calle Schlettwein; the Governor of the Bank of Namibia, Mr. Ipumbu Shiimi; other senior government officials, and representatives of the private sector and development partners. The mission would like to express its gratitude to the authorities and their staffs for the highly professional, productive, and open discussions. At the end of the mission, Mr. Honda issued the following statement:

“Namibia has broadly maintained robust growth since the global financial crisis, although growth in 2014 was somewhat weaker largely due to weak global demand for Namibia’s export items. For 2015, economic activities are expected to grow at about 5 percent, supported by mining production and strong activity in the construction sector (housing, a new mine and major infrastructure projects). Inflation remained modest at 3 percent in May 2015.

“Namibia’s growth prospects are increasingly clouded with downside risks. The main near-term risk is associated with the highly volatile Southern African Customs Union (SACU) revenues. In the coming years, the SACU revenues are expected to decline, reflecting the slowdown in the South African economy. Further increase in the current account deficits would continue to erode already low international reserves (currently at 9¼ percent of GDP or 1¾ months of imports) at end-April 2015.

“In light of this risk, the mission encourages the authorities to shift toward a tight fiscal policy stance. While safeguarding critical social and development needs, a tight fiscal policy is recommended to build an adequate international reserve buffer (16‒20 percent of GDP or 3‒5 months of imports) over the medium term, which would enhance Namibia’s resilience to future shocks. To this end, the mission welcomes the auhorities’ intention for fiscal consolidation. To help implement a prudent fiscal policy, the mission also encourages the authorities to enhance their efforts for public financial management reforms and to further strengthen tax administration.

“Recent housing market development is another emerging risk. Fast growth in real estate prices—combined with the high concentration of banks’ mortgage lending—pose risks to the financial sector and the economy. To address risks associated with the housing market, the mission encourages the authorities to consider various targeted macroprudential policies, as needed. The mission acknowledges that the Bank of Namibia is considering taking some policy steps.

“The mission shares the authorities’ concerns on persistent high unemployment, particularly among the youth. While acknowledging the authorities’ policy efforts to address unemployment on various fronts, the mission encourages the authorities to further step up efforts to address unskilled labor and facilitate investment in labor-intensive industries. To this end, as many initiatives are being adopted under the government, the mission calls for their effective and swift implementation.