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The Minister of Finance and Public Enterprises, Iipumbu Shiimi, said the projections are an upward revision from the earlier forecasts in the main budget of 3.2% and 2.2% for 2023 and 2024, respectively.
Shiimi says there is continued improvement and optimism for economic growth during the 2023/24 financial year, citing that the preliminary indicators point to positive economic growth prospects due to strong revenue mobilisation.
The preliminary revenue outturn at the end of September 2023 stood at N$40.1 billion, equivalent to 53.7% of the initial revenue projections in the budget.
In this regard, Shiimi said revenue collections are some 6.6% points higher than the historical mid-year collection rate and are thus expected to exceed the initial budget projections.
“The execution rate on operational expenditure was 50.6%, while the development budget implementation rate including expenditure commitments stood at 37.7% by the end of September 2023, fairly in line with past trends," he said.
"Meanwhile, owing to the prevailing high interest rate environment, the half-year execution on statutory expenditure stood at 53.8% signalling potential overruns. This is despite notable compression in spreads on government securities, particularly relative to their corresponding South African benchmarks; and at the half-year mark, the total debt stock stood at N$149.3 billion, equivalent to 64.1% of GDP."
In February, Shiimi tabled an N$86.4 billion budget consisting of N$66.1 billion in operational expenditure, N$6.5 billion in development expenditure, N$2 billion of projects to be funded outside of the State Revenue Fund and N$10 billion in interest payments.
The Minister said the domestic economy remains resilient despite vulnerabilities in the global economy.
In sub-Saharan Africa, growth is projected to slow down to 3.3% in 2023 before picking up to 4% percent in 2024.
The projected slowed growth reflects, in several cases such as, worsening weather shocks, lower growth in key trading partners, and domestic supply bottlenecks, including, notably, in the electricity sector.
"Overall, while some of the extreme risks to the economic outlook have moderated, the balance remains tilted to the downside. The risk of commodity prices volatility has increased under renewed geoeconomic fragmentation and with risks to the climate transition. Further, while headline inflation has moderated, recent adverse energy price developments could entrench inflation further, thereby necessitating more monetary policy tightening," he said.
He further informed the nation that risks to the domestic economic outlook remain, although somewhat reduced, citing volatile global commodity prices as posing a threat to both domestic output and taxes.
"The depreciating real income for households, exacerbated by high inflation and interest rates are a risk to consumption as real incomes remain muted in the short to medium term. Furthermore, drought and water supply constraints pose a threat to domestic crop and electricity production.
"Nevertheless, the relatively strong outlook offers the opportunity for Namibia to adjust to medium-term risks and implement targeted policy packages to boost resilience and lift tomorrow’s growth prospects. Therefore, the immediate focus of fiscal policy in the near term is to shield the economy and the wellbeing of our people, particularly the most vulnerable segments of society, from the impact of the ongoing drought.
“Similarly, the medium-term fiscal framework will aim to implement further measures to contain cost of living pressures while maintaining fiscal sustainability through managing the pace of debt accumulation," the former Bank of Namibia governor said.
On the monetary and external sectors aligned to global developments, he said, the inflationary pressures subsided during much of 2023, although uptick has been noted recently to 5.4% in September 2023 due to adverse energy price developments.
Over the medium term, inflation is expected to remain within the 3% to 6% band; in line with the price developments. The repo rate was increased by a cumulative 100 basis points in the first two quarters of the year to 7.75%, to safeguard the currency peg and anchor inflation expectations.
"As alluded to, the resultant high interest rate environment erodes the real incomes of households and subsequently impacts overall consumption in the economy. Meanwhile, in terms of the balance of payments, the current account deficit has improved in 2023 on account of a lower trade deficit and improved income from the SACU customs pool over the period," he stated.
Shiimi also noted elevated foreign direct investments (FDI) inflows, especially for ongoing exploration activities in the extractive sector.
In addition, he said the stock of international reserves remains sufficient to cover international obligations standing at N$53.8 billion at the end of September 2023, equivalent to 5.6 months of import cover.
The previous financial year ended on the 31st of March 2023, actual outturns were realised, coming in at N$64.3 billion, fairly aligned to the revised estimates of N$64.1 billion.
Operational expenditure was recorded at N$60 billion reflecting a strong execution rate of 99.6%, with no significant overspending noted on any of the expenditure votes. On the other hand, a N$4.9 billion development expenditure was realised, representing an execution rate of 93% against the N$5.3 billion budget made available.
Meanwhile, actual spending on interest payments amounted to N$9.5 billion, some N$144 million over the revised budget estimates of N$9.3 billion resulting from the high interest rate environment.