In her maiden national budget statement, recently-appointed finance minister Ericah Shafudah yesterday tabled a cautious and conservative yet pro-growth budget of N$106.3 billion for the 2025/26 financial year.
However, the budget also comes with an increase in excise duties on the consumption of alcohol and tobacco, which took effect on 12 March 2025.
The largest budgetary allocations went to education with N$24.8 billion, finance getting N$14.6 billion and health taking N$12.3 billion.
The budget under the theme “Beyond 35: For a Prosperous Future”, represents an increase of 4.9% from the revised estimates of the last financial year.
Total expenditure for the current financial year consists of N$79.8 billion in operational expenditure, N$12.8 billion in development expenditure, including N$3.2 billion in development projects funded through external loans and grants, as well as N$13.7 billion in interest payments.
Tabling the 2025/26 Appropriation Bill, Shafudah emphasised her budget was a commitment to the continuous pursuit of fiscal sustainability to ensure domestic public finances are sustainable over the long-term.
Shafudah, who previously served as executive director in the finance ministry, noted this budget posed specific challenges in the resource allocation exercise, redirecting the finance ministry to employ a more rigorous approach in determining key and impactful priorities to accelerate service delivery and address the most pressing national needs, and improve infrastructure development. Moreover, she tabled an estimated operational budget of N$79.8 billion, which is an increase of 2.3% over the last financial year’s mid-term estimates.
In addition, to continue addressing infrastructure bottlenecks that Shafudah said weigh against Namibia’s growth potential, the development budget has increased by 22.6% to N$12.8 billion from the revised estimates for the financial year 2024/25. This is inclusive of N$3.2 billion in projects financed outside the State Revenue Fund.
As a ratio of gross domestic product (GDP), the development budget is equivalent to 4.6%, which is an improvement from 4.2% recorded last year.
Meanwhile, to service the national debt during the current financial year, N$13.7 billion has been allocated, which is equal to 14.8% of revenue and 4.9% of GDP.
“We remain concerned that we expend more resources on debt servicing than we plough back into the economy to grow our economic potential through the development budget. As such, there is a need for continued measures to contain the pace of debt accumulation so as to curb the rising debt-servicing costs. We are, therefore, committed to maintaining public debt on a reduction path and ensuring that debt is raised in the most cost-effective manner,” Shafudah assured the nation.
The finance minister further pointed out that Namibia’s total public debt is estimated to moderate from 66% of GDP during the 2024/25 financial year to 62% in the current financial year.
Tax policy
On the tax policy front, this year’s budget contains macro-economic and tax policy proposals aimed at supporting economic growth through boosting domestic demand, broadening the tax base to improve revenue mobilisation, and enhancing the competitiveness of the tax system to attract investments and foster private sector development.
The proposals include amending the schedule of zero-rated commercial properties to include State-acquired commercial properties, and increasing the retirement funds’ single commutation threshold at retirement from N$50 000 to N$375 000 to provide relief for senior citizens. Said Shafudah: “This intervention will increase the disposable incomes of senior citizens, offering them a significant cushion against the erosion of their purchasing power by the high inflation experienced in recent years”. The finance minister continued that VAT legislation is being finalised on imported digital services to even the playing field with domestic service providers, considering the exponential growth noted in the consumption of digital services.
In addition, an annual tax benefit cap of N$400 000 will be introduced on housing benefits to improve fairness of the housing fringe benefit across income brackets. Lastly, in line with Namibia’s agreement with the Southern African Customs Union (Sacu), a 6.75% increase in excise duties on the consumption of alcohol and tobacco took effect on 12 March 2025.
This comprises a litre of sparkling wine which will cost N$1.20 more; a litre of absolute 750 ml bottle of spirits will increase by N$5.53; cigars will cost N$369.36 more per kg; fortified wine will increase by 64c; spirits will cost N$18.52 more per litre of absolute alcohol; and the duty on a pack of 20 cigarettes rises by N$1.04.
First impressions
Providing a first impression on yesterday’s national budget, economist Klaus Schade noted the revenue outlook has deteriorated, and that revenue projections were adjusted downward for the first time in many years.
“Subsequently, the budget deficit and total public debts were adjusted upward, leaving little room for an expansionary budget, and in particular substantially higher allocations to the development budget. The extremely low execution rate of some 63% for capital projects over the 11 months of the FY2024/25 is of concern since it has prevented potential job-creation and improvement in infrastructure,” he stated.
He added that uncertainties surrounding revenue going forward should put any ambitious luxury projects that won’t address the three main development objectives of job-creation, prosperity for all and income equality to rest.
Schade pointed out that on a positive note, the Eurobond of US$750 million will be largely redeemed, and the remaining funding needs will be sourced domestically to avoid exchange rate risks.
“Funding is also allocated for the second phase of the Neckartal Dam, and could result in job-creation. The expected finalisation of VAT legislation for imported e-services is also welcome to level the playing field. The allocation to the development budget as a share of the total budget has increased, which will have positive impacts on the labour market and for the construction sector, if genuine Namibian companies are the beneficiaries of these projects,” he added.
Finally, the national procurement system will be reviewed and a procurement court established to accelerate the process, which Schade expects to have a positive impact on economic activity and job-creation.
Former presidential advisor and previously chief executive of the Development Bank of Namibia, John Steytler also weighed in on the budget pointing out that it is a “cautiously ambitious budget that walks a tightrope between fiscal discipline and development imperatives”.
Steytler continued: “It’s a mature attempt to juggle realities, but one wrong move, such as commodity collapse, drought or execution failure, could leave the fiscus cooked. If implementation matches ambition, Namibia is on a slow but solid road to fiscal strengthening and inclusive growth”. Also weighing in, an investment analyst at Sanlam Investments, Erry Iipumbu, commented that the 2025/26 national budget reflects a pragmatic balance between fiscal challenges and targeted investments. “With revenue growth constrained by external factors like reduced SACU receipts and muted mining sector contributions, the government emphasises cautious projections and prudent spending. Key priorities include increased development expenditure to address infrastructure bottlenecks, strategic debt management to stabilise public finances, and leveraging domestic financing to mitigate exchange rate risks while fostering local economic growth. Despite uncertainties, the budget underscores a commitment to long-term fiscal sustainability and resilience,” Iipumbu stated.
Another economist, Josef Sheehama, remarked that this budget is promising, and should promote improvements in society and the economy rather than slip into the wrong hands.
“The N$2.6 billion allocated for agriculture and land reform in FY2025–2026 is insufficient when considering the reform and resuscitation of the green plan, among other measures to reduce unemployment. Fiscal stability will remain elusive, and Namibia runs the risk of further economic decline at the expense of the welfare of its citizens, as the Anti-Corruption Commission has been allocated N$116.5 million in FY202/26, which is limited to a proactive approach to implementing concrete anti-corruption measures,” he stated.
He added that to rebuild public confidence and ensure all Namibians benefit, government should place a high priority on fiscal responsibility and implement effective anti-corruption measures.
“It is commendable that money has been set aside for youth and sport in those two areas since it will empower young people and support the sport industry. Interest payments from external loans totalling N$13.7 billion should be handled carefully, and it is advisable to keep the overall debt as a proportion of GDP below 70%, which is standing at 66%,” Sheehama stated.
He said the effects of poor governance in some State organs should be given more consideration, “and it may be necessary to carefully tackle, monitor and report on preconditions in order to stop corruption and ensure all Namibians benefit, which will reduce income inequality”.
Photo: Heather Erdmann