The 2026 National Budget showed that Namibia’s fiscal trajectory has deteriorated, compared to recent favourable expectations.
This is according to Floris Bergh, chief economist at Capricorn Asset Management (CAM), whose latest budget analysis forecasts that Namibia’s creditworthiness is unlikely to improve and that funding pressure is expected to remain high as State-Owned Enterprises (SOEs) join the queue. Bergh also expects this yield curve to remain elevated and steep but, in his assessment, still anchored by low default risk.
“A key principle of the new administration’s policy is how it foresees the role of State-Owned Enterprises (SOEs). These institutions are meant to drive higher economic growth, and they have to leverage their balance sheets to raise capital in the capital markets. The government will rather guarantee debt of viable SOEs to enable them to borrow and grow, rather than take on debt at the centre,” Bergh stated.
The CAM economist added that guarantees of up to a “benchmark” of 10% of GDP appear to be envisaged.
“When nominal GDP reaches N$300 billion, this means that SOE guarantees will amount to N$30 billion. No doubt, SOEs that come to market will be scrutinised by prospective lenders and will have to pay up on the government yield curve”, Bergh stated.
He noted that finance minister, Ericah Shafuda, did “rather well” in her first proper budget, commenting: “She faced the stark reality of stagnant revenue amidst the slower economy and pressurised households.
She did not announce any worrying surprises on the tax front but was obliged to describe an uncomfortably bleak economic and fiscal picture.
It appears to us that the new administration is still settling in, and we give the new finance minister the benefit of the doubt that, if and when revenue grows stronger, the health ratios will improve”. The ratios Bergh referred to include, amongst others, the deficit-to-GDP ratio (5.8%), the debt-to-GDP ratio (67.5%), and the interest costs-to-revenue ratio (18%).
Expenditure
Bergh further noted that much is made of Public Expenditure Reviews (PER’s), stating: “We expect some information in this regard, that is, whether the reviews were fruitful, which should result in cutting unnecessary and unproductive spending.
It is very commendable that the Ministry of Finance (MoF) held the line in the Mid-Year Budget Review (MYBR) of October, refusing to expand the overall N$106 billion envelope”.
He added that lowering national spending in the 2027 financial year (FY27) as compared to the 2026 financial year (FY26) will be a tall order.
Funding
According to Bergh, funding pressure in FY26 was immense due to the deficit and maturities, the most significant of which he noted was the US$750 million Eurobond.
“In FY26, N$24.5 billion was funded from the domestic market and in FY27, N$17.3 billion. This rate of borrowing from the domestic capital market cannot be maintained. We would now like to see the normalisation of government borrowing. Otherwise, creditworthiness will not improve, economy-wide borrowing costs will remain elevated, and the government’s funding needs will crowd out other borrowers”, Bergh stated.
Deficit
Based on the latest national estimates of revenue and expenditure, Bergh points out that the deficit in FY2 will amount to N$16.6 billion, or 5.8% of GDP, which he stated remains much too large and follows on 6.9% in FY26, or N$18.5 billion.
“Over the past decade and a half, the deficit has averaged 6% per annum. On only two occasions was the deficit below the healthy rule of thumb of 3% of GDP. Therefore, the resulting inexorable march upward of indebtedness has to be halted now as a matter of urgency,” Bergh stated.
Meanwhile, over the next three years, Bergh expects real GDP growth of 3.3% per annum and nominal GDP growth of 7.2% per annum, on average.
“We believe that the macro assumptions of the finance minister are reasonable and realistic,” Bergh stated, adding, “It does not paint a rosy picture.”