November 01, 2024
Economy

IMF praises Namibia's fiscal discipline, warns of structural challenges

October 02, 2023
IMF praises Namibia's fiscal discipline, warns of structural challenges

The International Monetary Fund (IMF) has praised Namibia's strong fiscal discipline and prudent economic policies, which have spared the country from seeking financial assistance from the global lender.

Jaroslaw Wieczorek, the IMF mission chief for Namibia, said the country belongs to a fortunate group that does not typically require IMF intervention. He added that the Bretton Woods institution primarily steps in during times of crisis, when reserves are depleted, domestic borrowing options are exhausted, or significant adjustments are necessary.

Wieczorek said Namibia's current economic stability and responsible fiscal management place it in a favorable position, reducing the need for IMF intervention.

"Namibia is not a frequent visitor to the IMF due to its robust economic fundamentals," Wieczorek said in Windhoek on Monday after the IMF concluded its Article IV mission to Namibia. "Unlike other middle-income countries, such as Zambia or Ghana, Namibia's current economic situation does not necessitate IMF assistance."

During his address, Wieczorek also touched on the broader economic challenges facing Namibia. He highlighted the importance of improving the ease of doing business, enhancing access for foreign investors, and addressing the need for skilled workers to fill job vacancies in various sectors.

"The cost of doing business and access for foreign investors are critical aspects that need to be addressed," Wieczorek said.

Furthermore, he noted that creating opportunities for vocational training and upskilling the workforce is vital, especially for those who lack the necessary qualifications to enter the job market.

While acknowledging the significance of Namibia's mineral wealth as a source of revenue, Wieczorek cautioned that it comes with its own set of challenges. He highlighted that mineral-rich economies often generate substantial income without providing employment opportunities for a large workforce.

"The structural challenge faced by Namibia is to create jobs while managing its mineral wealth efficiently," Wieczorek said. "This is a long-term endeavor that requires resolute policy implementation. The government's role is not necessarily to create jobs directly but to foster an environment in which job opportunities can flourish."

According to latest data, Namibia's total central government debt surged by 11.4% on a yearly basis, to N$145.6 billion at the close of June 2023.

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.

Namibia's strong economic fundamentals have spared the country from seeking financial assistance from the IMF. However, the country faces some broader economic challenges, such as improving the ease of doing business, enhancing access for foreign investors, and addressing the need for skilled workers.

Additionally, Namibia's government debt remains significantly above the SADC benchmark of 60%. The Bank of Namibia anticipates a moderate decline in the total debt stock in the coming years, but the government should continue to implement sound fiscal policies to ensure that debt remains sustainable.

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Last modified on Tuesday, 03 October 2023 18:30
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