Namibia’s current account balance worsened to a deficit of N$8.6 billion during the third quarter of 2022 compared to a lower deficit of N$7 billion in the corresponding quarter of 2021 and N$7.5 billion a quarter before.
These figures were released by the Bank of Namibia (BoN) in its quarterly bulletin last month.
Local economist Magdalena Nangolo said a decrease in Southern African Customs Union (SACU) receipts means lower revenue, which would translate to worsening economic performance of the country.
“We can likely expect less government projects to be completed or get off the ground. Lower receipts mean bad news for Namibia,” she explained.
A country’s current account records the value of exports and imports of both goods and services and international capital transfers. The annual and quarterly deterioration in the current account balance was mainly supported by a larger deficit recorded in merchandise trade balance, as imports rose at a faster pace relative to exports.
“During the third quarter of 2022, net inflows of secondary income into Namibia declined both on annual and quarterly basis, on the back of lower SACU receipts and higher payments for workers remittances, respectively,” reads the report.
The bulletin added the net inflows on the secondary income account declined by 6.4% and 1.7% on an annual and quarterly basis to N$3.8 billion during the third quarter of 2022. The annual decline was largely on account of lower SACU receipts, which fell by 3.8% to N$3.5 billion. The quarterly fall in the secondary income emanated from higher workers remittance payments, which rose by N$94 million to N$116 million during the third quarter of 2022.
As a percentage of gross domestic product (GDP), the current account deficit increased to 17.1% from 15.9% in the corresponding quarter of 2021 and the previous quarter.
Finance minister Iipumbu Shiimi, during the 2020/2021 budget statement, stated domestic revenue for the year was projected at N$51.4 billion, of which N$22.3 billion was to be anchored by SACU receipts, representing about 43% of total revenue.
As per the above figure, SACU receipts are one of Namibia’s most important revenue sources, and any deterioration has a negative impact on the domestic economy and government’s ability to honour its commitments.
Furthermore, Shiimi in the 2022/23 mid-term budget review, stated in the outer years of the medium-term expenditure framework (MTEF), government revenue is projected to gradually increase in line with the recovery in economic activities and supported by gains from improved tax compliance and collections of tax arrears in line with tax administration reforms.
“Specifically, upbeat activities in the diamond sub-sector are expected to boost company taxes, dividends, and royalties. Furthermore, SACU revenue is also estimated to recover over the MTEF due to improved economic activity in the region and normalisation of regional trade flows,” noted Shiimi.