Namibia’s N$104 billion national budget, tabled on Thursday by Finance Minister Ericah Shafudah, was dominated by operational spending versus a sharp drop in capital expenditure. 

Tabled under the theme “People, Productivity and Prudence,” this year’s budget has some analysts asking whether Namibia is consolidating at the expense of growth, whether interest will consume a larger share of revenue, and whether growth will remain moderate. 

For FY2026/27, operational expenditure is projected at around N$81.3 billion, while the development budget drops sharply to N$8.47 billion, then rises only marginally later in the Medium-Term Expenditure Framework (MTEF). In other words, for every dollar spent on capital formation, nearly ten are consumed by wages, transfers, subsidies and interest, creating a noticeable imbalance. 

Capital expenditure, on the other hand, is the engine of future growth. Roads, rail, energy, water, land servicing and digital infrastructure are the assets that raise productivity and attract private investment. When development allocations shrink, the economy’s growth multipliers weaken. 

Over the MTEF, the government plans to spend less on development than in FY2023/24, which is difficult to reconcile with the ambitions of the Sixth National Development Plan (NDP6). The decline in capital expenditure is partly due to a reduction in externally funded projects, as grants and concessional loans taper off. The reality is that many projects are plagued by weak execution, as the figures show that only just over 70% of the development budget was executed by January 2026, which risks a low-investment outcome.

“Although this may be a way for the ministry to manage expectations, given the low execution rate of the development budget, this does pose a concern, given the high capital expenditure required to enable NDP6. On the other hand, this does leave room for the private sector to fill that gap in funding required to meet developmental needs,” stated Standard Bank Namibia Group Economist, Helena Mboti. 

Economist Klaus Schade commented that just N$6.5 billion is allocated primarily to road infrastructure, with no clear commitment to rail upgrades that could reduce long-term logistics costs and ease pressure on road maintenance. Rural electrification expansion also remains limited, and the long-anticipated Havana district hospital is absent from current timelines. 

“Hence, the budget contained little in respect of supporting economic growth, which usually comes from the development budget or tax relief. While the Minister highlighted the employment created in the public sector, the budget offers little support for employment creation in the private sector.

The Minister also referred to the construction of houses, while the priority should be on servicing land to provide housing opportunities, which can stop the mushrooming of informal settlements,” Schade commented. He emphasised that these are not marginal omissions because they shape the country’s long-term productivity trajectory.

At a macro level, the budget framework showed growth for 2025 has been revised down to 2.9%, with projections averaging around 3.3% over the medium-term. In an economy still grappling with structural unemployment, commodity dependence and weak domestic demand, some analysts believe that the expected 3% growth may steady the ship but does not transform it.

On the fiscal narrative front, revenue for FY2026/27 is projected at roughly N$89.8 billion, up modestly from the revised N$87.4 billion in FY2025/26. However, revenue-to-GDP has structurally declined from previous highs, reflecting weaker Southern African Customs Union (Sacu) transfers and softer diamond receipts. While uranium and gold offer some offset, the revenue base remains narrow and externally exposed. Without a catalytic event, such as a final investment decision in oil and gas, tax buoyancy remains vulnerable to global cycles.

Debt servicing

Domestic debt servicing is projected at N$16.2 billion in FY2026/27, rising above N$17 billion over the medium-term. That equates to roughly 18% of revenue. 

“In practical terms, nearly one in every five dollars collected will be allocated to debt servicing. This is the clearest sign that debt is now crowding out fiscal space for discretionary policy priorities. Even with a restored primary surplus, elevated interest costs compress flexibility. Sustained improvement would require stronger nominal growth, improved revenue buoyancy, and careful debt management to reduce refinancing costs. Rising global rates or tighter domestic liquidity conditions could quickly increase borrowing costs, placing pressure on the consolidation path even if spending discipline holds”, stated economist Almandro Jansen from financial services firm, Simonis Storm (SS). 

In terms of consolidation, the budget projects a narrowing of the deficit from 6.6% to 5.5% of GDP, with further reductions targeted over the medium term. Debt-to-GDP is expected to peak near 68% before easing to 66% by FY2028/29. Additionally, domestic borrowing is emphasised to reduce foreign-currency risks. 

Moreover, public-sector hiring in health and education is expected to provide some relief, while social pension increases offer modest support to vulnerable households. 

Also, the labour market imbalance persists, with youth unemployment remaining above 40%. Employers in mining, logistics and energy report shortages of technical and mid-level skills, even as graduates struggle to find work.  Without significant investment in technical training, apprenticeship systems, and industrial capacity, capital-intensive sectors such as oil, gas, and green hydrogen will generate limited employment multipliers.

Simonis Storm added that the coming 12 to 18 months will determine whether consolidation creates space for future expansion or gradually entrenches a high-operational, low-investment fiscal model. 

“This budget buys time. Whether that time is used to embed structural reform and improve labour absorption will determine whether Namibia’s next growth cycle is inclusive and durable or once again narrowly concentrated and fiscally constrained,” Jansen continued. 

– ebrandt@nepc.com.na