IMF: Namibia’s growth too weak to tackle unemployment, poverty

Namibia’s economic growth is expected to remain subdued in the near term, with the International Monetary Fund (IMF) warning that the country’s current growth trajectory is insufficient to meaningfully reduce unemployment, inequality and poverty.

In its 2026 Article IV consultation released in June, the IMF projected real gross domestic product (GDP) growth of 2.1% this year, following growth of just 1.7% in 2025. It expects growth to recover gradually to about 3% over the medium term.

The Fund attributed the weak outlook to depressed diamond production, declining gold output and elevated fuel costs, while warning that structural weaknesses such as skills mismatches, regulatory bottlenecks, limited economic diversification and a large public sector will continue to weigh on productivity and job creation.

“Economic growth remains insufficient to meaningfully reduce unemployment, inequality, and poverty,” the IMF said, noting that Namibia’s economy remains heavily concentrated in the public and extractive sectors.

The Fund said youth unemployment remains particularly high and argued that Namibia needs to move towards stronger private-sector-led growth and reduce structural barriers to employment.

It welcomed the government’s commitment to fiscal consolidation, saying the FY2026/27 budget represented a positive step towards debt sustainability through expenditure restraint and reforms to the Public Service Employees Medical Aid Scheme (Psemas).

However, it cautioned that further fiscal consolidation would be necessary over the medium term to create room for growth-enhancing investment, strengthen social protection and improve the country’s resilience to economic shocks.

The IMF called for comprehensive civil service reform, including functional job reviews and rationalisation of public-sector employment, arguing that this could reduce the crowding-out of private businesses and improve the efficiency of public services.

It also urged stronger oversight of public enterprises and improvements to public financial management.

Debt concerns

Despite the government’s fiscal consolidation efforts, the IMF projects Namibia’s gross public debt to rise from 66.1% of GDP in 2025 to 66.3% in 2026, before increasing further to 67.1% in 2027 and 70.7% by 2031.

The Fund said additional consolidation would be essential to place public debt on a sustainable path.

Revenue mobilisation should also be strengthened, including through improved tax administration and better capture of resource rents, particularly in fisheries.

The proposed Welwitschia Fund legislation was identified as an important mechanism for managing future revenues from natural resources.

Oil and green hydrogen opportunity

The IMF said Namibia’s emerging oil, gas and green hydrogen industries could provide a major opportunity to diversify the economy and generate employment.

However, it cautioned that these opportunities would require clear and transparent policy frameworks, balanced local-content strategies and education and training systems aligned with the skills demanded by emerging industries.

“Realising these benefits will require clear policy frameworks, balanced local content strategies, and alignment of education and training systems with evolving labor market needs,” the Fund said.

The IMF also called for reduced regulatory barriers, better infrastructure and public-service delivery, digital transformation, stronger support for small and medium-sized enterprises and improved access to finance.

It said faster progress towards final investment decisions in oil, gas and green hydrogen could provide an upside to Namibia’s growth outlook.

Rand peg

The IMF also highlighted the need for careful coordination between the Bank of Namibia’s policy rate and that of the South African Reserve Bank to protect Namibia’s currency peg to the rand.

It described the reduction in the interest-rate gap from 75 basis points to 25 basis points as a positive step, but said eventually closing the gap would be important to safeguard reserves and limit external pressures.

Namibia’s financial system remains stable and well capitalised, according to the IMF, although the Fund warned about increasing links between the sovereign and the financial sector.

The Fund also pointed to risks from a possible escalation of the war in the Middle East, tighter global financial conditions, weaker diamond demand, volatility in Southern African Customs Union (Sacu) revenues, rising public debt, foot-and-mouth disease and climate-related shocks.

Namibia’s economy grew by 1.7% in 2025, with strong uranium production and services activity partly offsetting weakness in diamonds, while gold and livestock production gradually recovered. Inflation fell during the year but is expected to rise modestly in 2026 because of higher fuel prices.

The IMF expects inflation to average 3.9% in 2026, before settling at around 3% over the medium term.