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The significant increase in debt is attributed to rising domestic and external debt, according to the latest data released in the Bank of Namibia's Quarterly Bulletin for September 2023.
As a percentage of the Gross Domestic Product (GDP), the total debt now stands at 64.2%, marking a 1.8% annual decline during the review period.
However, it remains significantly above the Southern African Development Community (SADC) benchmark of 60%.
The Bank of Namibia anticipates a moderate decline in the total debt stock to 65.7% of GDP by the end of the fiscal year 2023/24 based on expectations of primary surpluses in the budget and a faster increase in nominal GDP compared to the growth in debt.
Furthermore, the bank estimates that total debt will continue to decrease, reaching 60.6% of GDP by the end of 2025/26.
The report also highlights the government's efforts to narrow the budget deficit.
"The deficit for the fiscal year 2023/24 is expected to decrease significantly to 4.3% of GDP, driven by a 16.5% increase in revenue collections, which are expected to reach N$74.7 billion," the report reveals.
This increase is primarily attributed to higher receipts from the Southern African Customs Union (SACU), alongside rising company taxes, taxes on individuals, and value-added tax.
Despite these fiscal challenges, the Bank of Nambia reveals that the domestic economy remains on a positive trajectory, albeit with a slight slowdown in the second quarter of 2023.
"The economy recorded a growth rate of 3.7% during that quarter, lower than the 8.5% registered in the same period of 2022."
The primary and secondary industries experienced slower growth, particularly in agriculture, forestry, fishing, and construction.
However, "the mining and quarrying sector continued to sustain growth, while the tertiary industry, including wholesale and retail trade, information and communication, transport, storage, and tourism, remained strong".
Meanwhile, Namibia's current account deficit also improved during the second quarter of 2023, narrowing to 4.3% of GDP from the 14.4% recorded in the same quarter of 2022.
"This positive development was primarily driven by improvements in the merchandise trade balance and the secondary income account. International reserves rose to N$53.0 billion, equivalent to 5.1 months of import cover, bolstered by foreign direct investment (FDI) inflows, capital from AfDB and KfW loans, and net foreign currency placement by commercial banks," said BoN.
On the inflation front, Namibia experienced a decline in the second quarter of 2023, primarily due to a significant drop in transport-related inflation.
However, inflation remained higher than the previous year, standing at 5.9%.
The decline was attributed to stabilising international oil prices, lower vegetable oil and fat prices, and favourable grain harvests in South Africa.
On a yearly basis, the Bank of Namibia notes that overall inflation increased by 0.2% points from the same quarter in 2022, mainly due to higher food and housing inflation.
As of August 2023, headline inflation reached 4.7%, slightly up from the previous month. It is projected that overall inflation will average 6.1% in 2023.