Windhoek: The Executive Board of the International Monetary Fund (IMF) has completed the Article IV Consultation for Namibia. The authorities have agreed to release the Staff Report prepared for this consultation.
According to International Monetary Fund, Namibia's economic growth slowed from 5.4 percent in 2022 to 3.7 percent in 2024. This deceleration was primarily due to a decline in production prompted by lower diamond prices, despite rising gold and uranium prices. Oil exploration reached a plateau in 2024 after a surge in 2023, while the agricultural sector saw a significant contraction due to the 2023-24 drought, the most severe in a century. Inflation decreased, reflecting lower food and fuel prices in international markets.
Looking forward, growth is expected to remain subdued in the near and medium term. The conclusion of the drought is anticipated to boost growth in 2025; however, global trade policy uncertainty, particularly concerning U.S. tariffs, and a weak diamond market will dampen momentum. Growth is forecast at 3¾ percent for 2025 and 2026. Over the medium term, growth is projected to hover around 3 percent, constrained by structural rigidities despite increased public capital expenditure. Average CPI inflation is projected to ease to 4.1 percent in 2025 and remain around 4.5 percent in the medium term.
Directors acknowledged the authorities' commitment to fiscal discipline and growth-enhancing measures. They emphasized the need for sustained and larger fiscal consolidation over the medium term to strengthen public debt dynamics and the external position. Directors stressed accelerating fiscal reforms, including comprehensive civil service reform, state-owned enterprise reforms, and strengthening public financial management. They also recommended increasing public investment, expanding social protection, and building resilience to weather shocks.
In the absence of capital outflows, Directors suggested gradually aligning the policy rate with the South African Reserve Bank (SARB) to maintain the currency peg. They emphasized that the Bank of Namibia should remain attentive to economic conditions.
Directors also commended progress in enhancing financial sector resilience through the introduction of the bank resolution policy. They encouraged monitoring risks, including those from the sovereign bank nexus and household debt. Finalizing additional policy measures, including counter-cyclical capital buffers, was recommended. Continued efforts to strengthen the AML/CFT framework are crucial for removal from the FATF grey list.
Directors highlighted the necessity of bold structural reforms to promote sustainable, inclusive, private sector-led growth and improve external competitiveness. They recommended addressing key barriers by improving human capital, enhancing the business climate, and fostering digitalization. Directors supported developing policies to harness oil, gas, and green hydrogen for economic diversification and job creation.
The next Article IV Consultation with Namibia is expected to occur on the standard 12-month cycle.