Revenue shortfall widens deficit as debt rises in mid-year review
Government revenue for the six months to the end of September fell short of projections set out in the March main budget, resulting in a wider fiscal deficit and rising public debt, according to the latest quarterly bulletin released by the Bank of Namibia (BoN).
The mid-year budget review revised the projected central government deficit for the 2025/26 financial year upward from 4.6% to 6% of gross domestic product (GDP), significantly above the 4% recorded in 2024/25.
The deterioration was driven primarily by weaker-than-expected revenue collection, rather than higher spending.
As a result, government debt continued to rise, climbing 10% year-on-year and 2.7% quarter-on-quarter to the end of September 2025.
The increase was primarily driven by higher domestic borrowing, while external debt declined over the same period.
Namibia’s current account deficit widened to 8.8% of quarterly GDP, up from 8.4% in the previous quarter and 7.8% in the same period last year.
The annual expansion was mainly attributed to lower Southern African Customs Union (SACU) receipts, while the quarterly deterioration reflected a larger merchandise trade deficit as imports grew faster than exports.
Both the current account and financial account recorded deficits, necessitating a drawdown of international reserves.
Loss of trade
Foreign reserves declined during the quarter, largely due to net South African rand outflows by commercial banks, driven by portfolio investment exits, other investment flows and higher foreign payments by government and customers.
Despite the decline, reserves remained adequate, providing import cover of 3.6 months and sufficient capacity to meet Namibia’s external obligations.
Meanwhile, the real effective exchange rate appreciated by 1.4% year-on-year, signalling a relative loss of trade competitiveness for Namibian exports in international markets.
The bank's bulletin highlights mounting fiscal and external pressures as revenue constraints, rising debt and weaker competitiveness shape Namibia’s macroeconomic outlook heading into the second half of the financial year.
During the third quarter of 2025, domestic economic activity recorded its eighteenth consecutive quarter of positive growth since the second quarter of 2021, supported largely by the tertiary industries.
Annual real GDP growth reached 1.9% in the third quarter of 2025, improving from 1.3% in the second quarter but remaining slightly below the 2.1% recorded in the corresponding quarter of 2024, continuing the trend of slower growth in 2025 compared with the preceding four years.
In agriculture, livestock marketing continued its steep downward trajectory, more than offsetting gains in crop production.
In the mining sector, overall output declined year-on-year as stronger uranium production was outweighed by reduced output of gold, diamonds and zinc concentrate.
The secondary industry recorded moderate growth, driven mainly by increased domestic electricity generation following higher water levels at the Ruacana hydropower plant, driven by above-average rainfall during the 2024/25 season.
Government consumption
The tertiary industry remained the main driver of growth, sustaining positive momentum led by financial services, wholesale and retail trade, and the education and health sectors.
From the expenditure side, growth was supported by higher private and government consumption and export activity, while imports rose marginally and gross fixed capital formation declined.
Diamond production fell both year-on-year and quarter-on-quarter, reflecting deliberate production cuts amid challenging market conditions.
Output stood at 442 012 carats in the third quarter of 2025, declining by 3.5% annually and 15.3% quarterly, largely due to reduced production at Debmarine Namibia in response to weak prices, rising demand for lab-grown diamonds and high inventory levels.
Uranium production increased by 2.8% year-on-year to 2 450 tonnes, supported by better ore grades, reduced downtime and improved technologies, although quarterly output declined by 9.7% due to strip-mining activities. The average uranium spot price fell to US$76.3 per pound from US$81.6 a year earlier, reflecting adequate supply and global uncertainty, despite a 5.1% quarterly price increase driven by renewed political support for nuclear energy in the United States.
Zinc concentrate production declined by 23.5% year-on-year to 15 027 tonnes, affected by challenging mining conditions and flooding, although output rose by 3.1% quarter-on-quarter.
International zinc prices averaged US$2 828 per metric tonne, increasing both annually and quarterly on tighter supply and stronger demand.
Gold production also declined, with output falling to 2 421 kg, down 6.6% year-on-year and 4.5% quarter-on-quarter due to lower-grade ore and resource depletion. This contrasted with strong price performance, as international gold prices rose by 39.5% year-on-year and 5.0% quarter-on-quarter to average US$3 459 per ounce, driven by global uncertainty, safe-haven demand and increased central bank purchases.
The mid-year budget review revised the projected central government deficit for the 2025/26 financial year upward from 4.6% to 6% of gross domestic product (GDP), significantly above the 4% recorded in 2024/25.
The deterioration was driven primarily by weaker-than-expected revenue collection, rather than higher spending.
As a result, government debt continued to rise, climbing 10% year-on-year and 2.7% quarter-on-quarter to the end of September 2025.
The increase was primarily driven by higher domestic borrowing, while external debt declined over the same period.
Namibia’s current account deficit widened to 8.8% of quarterly GDP, up from 8.4% in the previous quarter and 7.8% in the same period last year.
The annual expansion was mainly attributed to lower Southern African Customs Union (SACU) receipts, while the quarterly deterioration reflected a larger merchandise trade deficit as imports grew faster than exports.
Both the current account and financial account recorded deficits, necessitating a drawdown of international reserves.
Loss of trade
Foreign reserves declined during the quarter, largely due to net South African rand outflows by commercial banks, driven by portfolio investment exits, other investment flows and higher foreign payments by government and customers.
Despite the decline, reserves remained adequate, providing import cover of 3.6 months and sufficient capacity to meet Namibia’s external obligations.
Meanwhile, the real effective exchange rate appreciated by 1.4% year-on-year, signalling a relative loss of trade competitiveness for Namibian exports in international markets.
The bank's bulletin highlights mounting fiscal and external pressures as revenue constraints, rising debt and weaker competitiveness shape Namibia’s macroeconomic outlook heading into the second half of the financial year.
During the third quarter of 2025, domestic economic activity recorded its eighteenth consecutive quarter of positive growth since the second quarter of 2021, supported largely by the tertiary industries.
Annual real GDP growth reached 1.9% in the third quarter of 2025, improving from 1.3% in the second quarter but remaining slightly below the 2.1% recorded in the corresponding quarter of 2024, continuing the trend of slower growth in 2025 compared with the preceding four years.
In agriculture, livestock marketing continued its steep downward trajectory, more than offsetting gains in crop production.
In the mining sector, overall output declined year-on-year as stronger uranium production was outweighed by reduced output of gold, diamonds and zinc concentrate.
The secondary industry recorded moderate growth, driven mainly by increased domestic electricity generation following higher water levels at the Ruacana hydropower plant, driven by above-average rainfall during the 2024/25 season.
Government consumption
The tertiary industry remained the main driver of growth, sustaining positive momentum led by financial services, wholesale and retail trade, and the education and health sectors.
From the expenditure side, growth was supported by higher private and government consumption and export activity, while imports rose marginally and gross fixed capital formation declined.
Diamond production fell both year-on-year and quarter-on-quarter, reflecting deliberate production cuts amid challenging market conditions.
Output stood at 442 012 carats in the third quarter of 2025, declining by 3.5% annually and 15.3% quarterly, largely due to reduced production at Debmarine Namibia in response to weak prices, rising demand for lab-grown diamonds and high inventory levels.
Uranium production increased by 2.8% year-on-year to 2 450 tonnes, supported by better ore grades, reduced downtime and improved technologies, although quarterly output declined by 9.7% due to strip-mining activities. The average uranium spot price fell to US$76.3 per pound from US$81.6 a year earlier, reflecting adequate supply and global uncertainty, despite a 5.1% quarterly price increase driven by renewed political support for nuclear energy in the United States.
Zinc concentrate production declined by 23.5% year-on-year to 15 027 tonnes, affected by challenging mining conditions and flooding, although output rose by 3.1% quarter-on-quarter.
International zinc prices averaged US$2 828 per metric tonne, increasing both annually and quarterly on tighter supply and stronger demand.
Gold production also declined, with output falling to 2 421 kg, down 6.6% year-on-year and 4.5% quarter-on-quarter due to lower-grade ore and resource depletion. This contrasted with strong price performance, as international gold prices rose by 39.5% year-on-year and 5.0% quarter-on-quarter to average US$3 459 per ounce, driven by global uncertainty, safe-haven demand and increased central bank purchases.
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