By Catherine Sasman
WINDHOEK
After a two-week study, an International Monetary Fund (IMF) mission said Namibia has “generally favourable” economic development with a projected real Gross Domestic Product (GDP) of 4.4 percent this year, which is in line with its regional partners.
“Inflation has recently been driven higher by strong increases in food prices, but is expected to moderate to the six percent range in 2008 due, in part, to recent increases in interest rates,” said leader of the mission, Peter Allum, the IMF’s deputy senior personnel manager of the African department.
He reported that strong mineral exports and Southern African Custom Union (SACU) receipts have contributed to a fiscal surplus, and projected that it would further raise a large external current account surplus which is largely invested abroad in portfolio investments in South Africa.
Public debt is projected to fall to 23 percent of GDP by mid-2008.
Allum said the favourable fiscal situation, combined with expenditure reforms, offers opportunities to strengthen the economic base and reduce poverty.
“Although SACU receipts are projected to decline relative to GDP in the coming years, improvements in revenue administration and a reprioritisation of expenditure should allow for increased outlays in priority areas such as rural infrastructure, education, and other programmes that promote growth and support progress towards the Millennium Development Goals,” said Allum.
The mission and the Namibian Government agreed that reducing the high unemployment rate, which is estimated at more than 35 percent, calls for a larger contribution to growth from non-mineral manufacturing, tourism, and other service activities.
“Increasing competitiveness is key,” the IMF report stated, “requiring efforts to minimise business impediments and to foster a more flexible labour market.”
In this regard, the mission agreed that a careful balance needed to be struck with Namibia’s social goals for worker protection.
The mission further welcomed Government efforts to better utilise the high domestic savings rate to raise growth and employment.
To facilitate efficient domestic absorption, the IMF report said, any amendments to domestic investment requirements should be incremental, providing an opportunity to monitor the impact on financial sector risk and returns.
The mission suggested that the Government should consider market-based alternatives, including broadening the range of available domestic assets, such as through securitising public agency funding.
It shared the Government’s view that further development of the domestic financial sector would facilitate broad-based economic growth.
“Innovations by banks and other financial institutions in providing financial services to poorer households and small and medium-sized enterprises were welcome steps in this regard,” the IMF mission said.