Import substitution the way to go

Getting rid of the trade deficit

08 June 2021 | Economics

Activity in mining and agriculture have started showing signs of recovery. Johannes !Gawaxab, Governor: Bank of Namibia (BoN)

PHILLEPUS UUSIKU

To ensure that the domestic economy revives on a long-term basis, import substitution, export promotion and investments should all be considered as feasible policy choices, and pursued aggressively.

These remarks were made by the governor of the Bank of Namibia (BoN), Johannes !Gawaxab at a stakeholders meeting in the Erongo region last week aimed at exchanging views on pressing economic matters facing the region and the country at large.

There is a need to give local firms the assistance they need through local procurement and promoting a culture of shopping locally. This is in addition to policy recommendations such as the Harambee Prosperity Plan II, which must be executed with the appropriate urgency in order to achieve the much-needed economic recovery, he said.

According the Namibia Statistics Agency (NSA), for the month of April, Namibia spent about N$10.4 billion on foreign goods, an increase of N$3 billion or 40.5% when compared of an amount of N$7.4 billion in April last year. In March, imports stood at N$10.2 billion, a slight increase of 2%.

The value of exports in April 2021 declined by 0.8% to N$8.3 billion from its level of N$8.4 billion recorded in March 2021. However, when compared to N$5.7 billion recorded in April 2020, exports increased by 47.6%.

Following these developments, Namibia recorded a trade deficit to the tune of N$2 billion compared to a deficit level of N$1.8 billion recorded in both March 2021 and April 2020, NSA pointed out.

Sectors

In order to boost exports and reduce imports, it of critical importance to ensure that key sectors receive the necessary investments to enhance economic growth.

!Gawaxab notes that activity in mining and agriculture have started showing signs of recovery, while the tourism sector is still awaiting the return of international tourists.

He adds the Erongo region is a key pillar for the domestic economy due to the number of activities taking place such as mining, the blue economy, logistics, services, and tourism.

In terms of the country's economic challenges, which were exacerbated by the Covid-19 epidemic, resulted in Namibia's Gross Domestic Product (GDP) shrinking by 8% in 2021, eliminating jobs and hobbling businesses while also putting pressure on the government debt. The governor highlighted that the country cannot afford another hard lockdown since it would jeopardise more jobs and businesses.

Finally,!Gawaxab reminded stakeholders that "vaccination policy is economic policy. As such, for the economy to recover, we need successful vaccination, investments and stability of the financial sector."