KEETMANSHOOP – Bank of Namibia Governor Iipumbu Shiimi says there was little that Namibia could have done to avoid slipping into the current economic situation facing the country, because of global market forces.
Speaking to New Era on the sidelines of a working lunch at Keetmanshoop yesterday, Shiimi said the current economic situation is a result of both domestic and global factors, but the country has no power internally to have avoided the crisis.
He explained that the economic downturn is a global issue that started in the United States and this, he said, is a clear demonstration that the world is interconnected, both in good and bad times. “This is a global issue, and I do not think there is much you can do or we could have done. I mean there is not much that you can do if the demand for your diamonds falls, is there?”
He explained that when external factors such as a decline in demand for commodities strike, there is little that can be done domestically to improve this and when a country does not sell its commodities the economy will suffer.
Namibia’s economy is heavily dependent on the extraction and processing of minerals for export. Mining accounts for 11.5 percent of GDP, but provides more than 50 percent of foreign exchange earnings.
“Who buys diamonds? The biggest buyer is America and when demand in America died in 2009, Namdeb closed and sent employees on a three-month holiday, why? Because there was no customer in America, so there is not much you can do about this,” he noted.
The country’s current economic status, which saw freezing of jobs in the public sector and massive job losses in the private sector, Shiimi attributed to “slow” economic activities.
He said government must make deliberate interventions to grow the economy, especially in areas such as agriculture, tourism and logistics. He said the economy must be better prepared to handle any global economic downturn in the future.
He urged government to ensure that spending is reduced and buffers and reserves created, so that Namibia does not end up in a situation she currently finds herself in when negative global market forces strike again.
“Of course countries go through cycles like this and what we need to do now is always be prepared – as government we must always create enough buffers, reserves, and that is why we now need to reduce our spending so that we can now create these buffers,” he said.
“When this crisis started, our debt was very low so we were better prepared but the crises continued for a very long time and when we have enough money again we need to make sure that we don’t spend that whole money, because crises will come and go.”
The reserve bank governor said that he expects things to get better come next year, saying projections based on the information at hand indicate that there is economic growth expected – but these are only projections and nothing is certain.
Anyone who says they are certain on what will happen in the next six months are being economic with truth, he said while explaining the need for caution when dealing with economic forecasts.
“What we have seen last year and the beginning of this year is that the economy is still in a very weak spot, but we are starting to see some signs of improvement but very slow, so whether you call it recession or not does not really matter because these are just technical terms,” he said when asked whether Namibia has slipped into recession like neighbour South Africa.
“What is important is that there are movements in the economy and things are starting to improve, but slowly,” he said.
The lunch was attended by
//Kharas regional governor Lucia Basson, and regional councillors and various stakeholders.