Tailwinds and tentativeness: Decoding Namibia's fiscal outlook
Off to a good start
A tightrope walk between opportunity and uncertainty
After a decade marked by economic headwinds and the weight of unproductive spending, Namibia finds itself at an interesting juncture.
A confluence of global tailwinds now offers a chance for real growth, yet the recently unveiled budget strikes a notably conservative tone, Cirrus Capital noted of the recent budget tabling by newly appointed finance minister, Ericah Shafudah in March.
“While there was a confluence of external pressure that played a role in the downturn in the Namibian economy over most of the last decade, the country was burdened by excessive government (largely) unproductive spending. This was exacerbated by increasingly short-sighted, nationalistic policy and a government that increasingly wanted control over the economy,” Cirrus Capital (CC) said.
Describing the budget as encouraging, CC noted the government’s efforts at fiscal stability and debt stabilisation, two equally important issues.
“All in all, this budget was encouraging, as it is mostly a continuation of the (better) direction taken by the ministry of finance in recent years (particularly post-Covid). There remains a commitment to fiscal stability, prudence and debt stabilisation. Despite some of our reservations, the directional continuity is promising,” CC said.
Despite a projected fall in revenue for the medium-term expenditure framework (MTEF), CC noted that it expected the government’s debt matrices to stay within acceptable levels.
“With lower expected revenue collections over the period, the key fiscal metrics have deteriorated relative to the mid-term budget review tabled in November 2024. Over the MTEF, interest expense as a percentage of gross domestic product (GDP) is expected to average 14.3%, the primary budget balance is projected to remain positive, debt-to-GDP is expected to average 61.8%, and the deficit-to-GDP will average 3.9%,” CC said.
According to CC, it is an indication that Namibia is moving in the right direction with regards to its management of its finances.
“This reflects a country moving in the right direction (with achievable growth forecasts) despite the need to address key areas of the economy, and quickly,” CC said.
“At this juncture, many headwinds have fallen away, and tailwinds have risen, providing Namibia with more potential for growth than seen in many years. However, it is difficult to reconcile this 'boring' budget with the new administration's stated initiatives and intentions,” it added.
The change in administration, and the tabling of the budget was a further indication of the government’s intent to address Namibia’s socio-economic issues, CC noted.
“The short turnaround between the announcement of the Cabinet and tabling of this budget, and the vast differences in how to address Namibia's economic and socioeconomic issues, indicate that this budget may not be the enacted path forward - but merely a stepping stone on the pathway there,” it said.
Yet, despite all the positive indications, talks around the revival of an airline and planned expenditure on infrastructure projects bring about an air of uncertainty, CC noted.
“This budget is marred by clouds of uncertainty, in the shape of things like the reintroduction of a national airline, potentially outsized expenditure on potential white elephants, and an overhaul of the government's role in the economy,” it said.
According to CC, the fledgling administration needs time to map out its specific goals and strategies. The budget's emphasis on fiscal responsibility is expected to guide these plans.
“The new government ought to be given time to determine its intended tangible outcomes and how to achieve them. The commitment to fiscal discipline outlined in this budget should be the framework around which they shape those. For now, we remain in a cautious limbo,” CC said.
Shafudah, less than a week into her job as finance minister, faced a formidable challenge in her first budget presentation yesterday, as weak revenue prospects cast a shadow over the 2025/2026 fiscal year (FY).
With projected revenue of only N$84.4 billion – hampered by plummeting global diamond prices and deferred dividends from key public enterprises – Shafudah unveiled an ambitious N$106.3 billion budget to fund the government’s priorities.
Providing an overview of total expenditure, Shafudah allocated N$79.8 billion for operational costs, N$12.8 billion for development expenditure – including N$3.2 billion in externally funded development projects – and N$13.7 billion for interest payments.
“This includes N$3.2 billion in projects financed outside the state revenue fund,” she added.
Settling the N$13 billion eurobond
From a financing perspective, FY2025/26 is expected to be an eventful year, with the government facing the imminent redemption of the US$750 million eurobond on 29 October.
“In this regard, we have successfully accumulated US$463 million in the sinking fund over the past financial years,” Shafudah noted.
To ensure adequate resources for this obligation, the government aims to add an additional N$3 billion to the fund.
“Going forward, we intend to inject another N$3 billion (US$162 million) into the sinking fund during FY2025/26 before the bond matures. This will leave a balance of N$2.3 billion (US$125 million), which will be refinanced through the domestic market,” she explained.
Given the appetite for government debt instruments and prevailing interest rates, Shafudah deemed it prudent to source funding locally.
“Considering the sufficient liquidity levels and demonstrated appetite for government securities, we believe it is most optimal to source funding from the domestic market,” the minister explained.
Moreover, government will focus on settling an International Monetary Fund (IMF) financial instrument accessed in 2021 to combat the Covid-19 pandemic.
A confluence of global tailwinds now offers a chance for real growth, yet the recently unveiled budget strikes a notably conservative tone, Cirrus Capital noted of the recent budget tabling by newly appointed finance minister, Ericah Shafudah in March.
“While there was a confluence of external pressure that played a role in the downturn in the Namibian economy over most of the last decade, the country was burdened by excessive government (largely) unproductive spending. This was exacerbated by increasingly short-sighted, nationalistic policy and a government that increasingly wanted control over the economy,” Cirrus Capital (CC) said.
Describing the budget as encouraging, CC noted the government’s efforts at fiscal stability and debt stabilisation, two equally important issues.
“All in all, this budget was encouraging, as it is mostly a continuation of the (better) direction taken by the ministry of finance in recent years (particularly post-Covid). There remains a commitment to fiscal stability, prudence and debt stabilisation. Despite some of our reservations, the directional continuity is promising,” CC said.
Despite a projected fall in revenue for the medium-term expenditure framework (MTEF), CC noted that it expected the government’s debt matrices to stay within acceptable levels.
“With lower expected revenue collections over the period, the key fiscal metrics have deteriorated relative to the mid-term budget review tabled in November 2024. Over the MTEF, interest expense as a percentage of gross domestic product (GDP) is expected to average 14.3%, the primary budget balance is projected to remain positive, debt-to-GDP is expected to average 61.8%, and the deficit-to-GDP will average 3.9%,” CC said.
According to CC, it is an indication that Namibia is moving in the right direction with regards to its management of its finances.
“This reflects a country moving in the right direction (with achievable growth forecasts) despite the need to address key areas of the economy, and quickly,” CC said.
“At this juncture, many headwinds have fallen away, and tailwinds have risen, providing Namibia with more potential for growth than seen in many years. However, it is difficult to reconcile this 'boring' budget with the new administration's stated initiatives and intentions,” it added.
The change in administration, and the tabling of the budget was a further indication of the government’s intent to address Namibia’s socio-economic issues, CC noted.
“The short turnaround between the announcement of the Cabinet and tabling of this budget, and the vast differences in how to address Namibia's economic and socioeconomic issues, indicate that this budget may not be the enacted path forward - but merely a stepping stone on the pathway there,” it said.
Yet, despite all the positive indications, talks around the revival of an airline and planned expenditure on infrastructure projects bring about an air of uncertainty, CC noted.
“This budget is marred by clouds of uncertainty, in the shape of things like the reintroduction of a national airline, potentially outsized expenditure on potential white elephants, and an overhaul of the government's role in the economy,” it said.
According to CC, the fledgling administration needs time to map out its specific goals and strategies. The budget's emphasis on fiscal responsibility is expected to guide these plans.
“The new government ought to be given time to determine its intended tangible outcomes and how to achieve them. The commitment to fiscal discipline outlined in this budget should be the framework around which they shape those. For now, we remain in a cautious limbo,” CC said.
Shafudah, less than a week into her job as finance minister, faced a formidable challenge in her first budget presentation yesterday, as weak revenue prospects cast a shadow over the 2025/2026 fiscal year (FY).
With projected revenue of only N$84.4 billion – hampered by plummeting global diamond prices and deferred dividends from key public enterprises – Shafudah unveiled an ambitious N$106.3 billion budget to fund the government’s priorities.
Providing an overview of total expenditure, Shafudah allocated N$79.8 billion for operational costs, N$12.8 billion for development expenditure – including N$3.2 billion in externally funded development projects – and N$13.7 billion for interest payments.
“This includes N$3.2 billion in projects financed outside the state revenue fund,” she added.
Settling the N$13 billion eurobond
From a financing perspective, FY2025/26 is expected to be an eventful year, with the government facing the imminent redemption of the US$750 million eurobond on 29 October.
“In this regard, we have successfully accumulated US$463 million in the sinking fund over the past financial years,” Shafudah noted.
To ensure adequate resources for this obligation, the government aims to add an additional N$3 billion to the fund.
“Going forward, we intend to inject another N$3 billion (US$162 million) into the sinking fund during FY2025/26 before the bond matures. This will leave a balance of N$2.3 billion (US$125 million), which will be refinanced through the domestic market,” she explained.
Given the appetite for government debt instruments and prevailing interest rates, Shafudah deemed it prudent to source funding locally.
“Considering the sufficient liquidity levels and demonstrated appetite for government securities, we believe it is most optimal to source funding from the domestic market,” the minister explained.
Moreover, government will focus on settling an International Monetary Fund (IMF) financial instrument accessed in 2021 to combat the Covid-19 pandemic.
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