Windhoek: The Executive Board of the International Monetary Fund (IMF) has completed the Article IV Consultation for Namibia. The authorities have agreed to publish the Staff Report prepared for this consultation. Namibia's economic growth has slowed from 5.4 percent in 2022 to 3.7 percent in 2024, largely due to a decline in diamond production outweighing gains from rising gold and uranium prices. Oil exploration remained stable in 2024 after a spike in 2023, while the agriculture sector faced a steep contraction due to the severe drought of 2023-24. Inflation has decreased, reflecting lower food and fuel prices in global markets.
According to International Monetary Fund, growth is projected to remain modest in the near and medium term. The end of the drought is expected to boost growth in 2025; however, increased global trade policy uncertainty, especially concerning U.S. tariffs, and a weak diamond market will dampen momentum. Growth is forecast at 3¾ percent for 2025 and 2026, with medium-term growth projected around 3 percent due to structural rigidities despite increased public capital expenditure. Average CPI inflation is expected to ease to 4.1 percent in 2025 and remain around 4.5 percent in the medium term.
Directors of the IMF welcomed Namibia's commitment to maintaining fiscal discipline and creating space for 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 called for accelerated fiscal reforms, including comprehensive civil service reform to manage the wage bill, state-owned enterprise reforms, improved public financial and investment management, and enhanced tax administration to ensure fiscal consolidation. They also recommended increasing public investment to spur growth, expanding social protection, and building resilience to weather shocks. The authorities were encouraged to continue efforts, with Fund technical assistance, to establish a strong governance framework for the sovereign wealth fund and a natural resource management framework to support long-term macroeconomic stability and economic development.
In the absence of capital outflows, Directors suggested gradually aligning the policy rate with that of the South African Reserve Bank (SARB) to safeguard the currency peg, leveraging SARB's rate reductions. They emphasized that the Bank of Namibia should remain vigilant to economic conditions.
Directors acknowledged progress in enhancing financial sector resilience, particularly through the introduction of the bank resolution policy. They encouraged continued monitoring of risks, including those from the sovereign bank nexus and household debt. Finalizing additional policy measures, such as counter-cyclical capital buffers and enhanced cooperation on crisis resolution, was recommended. Continued efforts to strengthen the AML/CFT framework are crucial for expedited removal from the FATF grey list.
Directors stressed that bold structural reforms are vital for fostering sustainable, inclusive, and private sector-led growth and improving external competitiveness. They recommended addressing critical barriers by improving human capital, reducing skill mismatches, enhancing the business climate, strengthening governance, and promoting digitalization. Directors supported developing policies aimed at utilizing potential oil, gas, and green hydrogen for economic diversification and job creation.
It is anticipated that the next Article IV Consultation with Namibia will occur on the standard 12-month cycle.