New Era Newspaper

New Era Epaper
Icon Collap
Home / Analysts advise against debt for consumption

Analysts advise against debt for consumption

2022-09-23  Maihapa Ndjavera

Analysts advise against debt for consumption

Namibia is battling with high public debt, and it remains imperative for the country to invest in productive sectors that will help repay these debts. 

According to economic analysts, the elevated public debt remains a primary concern in the medium-term for the country. 

Earlier this year, finance minister Iipumbu Shiimi said Namibia’s deficit is projected to average about 5.5% of the gross domestic product during the medium-term expenditure framework (MTEF), thereby necessitating a balanced fiscal consolidation policy stance during this period.  Shiimi
admitted at the time that given the outstanding debt stock, the projected budget deficit is still relatively high. 

Consequently, the public debt stock is expected to increase to N$140.2 billion, equivalent to 71% of GDP.  To tackle this concern, Shiimi said government is committed to redirecting much of the revenue increases expected in the coming years, as the economy recovers, towards debt redemption and reducing the borrowing requirement.  On Wednesday, the Friedrich Ebert Stiftung (FES) held a public dialogue focusing on foreign borrowing/debt and its implications on socio-economic livelihoods in Namibia.

At the occasion, economics professor at the Namibia University of Science and Technology Teresia Kaulihowa said lower level debt does not necessarily mean there is an ability to pay back.  “So, one important concept for you to decide is if you’ll be able to pay back. As debt increases, it creates demand. The question is, is that demand equally forwarded by an increase in supply to increase services put into productive use? If the debt is not put into productive resources, then in so doing, our inability to pay increases, irrespective of lower or higher levels of debt,” she explained.

Kaulihowa stated the method of repayment should also be put into perspective.  According to her, increasing taxes or tightening monetary policy for the future will create a problem – and as the country’s inability to pay becomes a problem, it will create a debt burden for the future generation. 

At the same occasion, an economist from stock brokerage Simonis Storm, Theo Klein, said debt growth has been exceeding GDP growth rates for most of the last decade.  According to Klein, this means most of the debt was used for consumption and not for enhancing the economy’s productive capacity.  He added there are consequences of not using debt wisely for sectors such as education, health, the standard of living, income and asset inequality – and this, he warned, could eventually lead to social unrest. 


2022-09-23  Maihapa Ndjavera

Share on social media