Namibia’s debt is projected to increase to N$117 billion, or almost 69% of GDP, while revenue will be down 14.3% compared to previous estimates for the 2020/21 financial year.

 According to finance minister Iipumbu Shiimi, the country’s borrowing requirement for the FY2020/21 is estimated at N$21.9 billion.
“Though the borrowing strategy is to largely fund the funding needs from the domestic market, the 2020/21 financial year’s budget deficit is significantly large to be sourced from the domestic market as per the norm. The funding strategy will employ a combination of both the domestic market, foreign market, Development Financial Institutions (DFIs) as well as cash balances. The funding approach will be detailed in the Medium-Term Funding Strategy 2020-2023,” said Shiimi when he tabled the budget last week. 

Shiimi added that the shock on GDP as a result of the significant reduction in economic activity in virtually all sectors of the economy has significant adverse effects on public finance. 

“Thus, unlike during other economic downturns, where the fall in output was driven by demand and government has choices to determine the level and extent of policy interventions; with the Covid-19 pandemic it is an unavoidable consequence of measures to limit the spread of the disease,” said Shiimi. 

Debt servicing and interest payments in the 2020/21 budget represent 16.4% of total government revenue, amounting to N$8.4 billion – 6.4 percentage points above the self-imposed benchmark of 10%.

Local economist Klaus Schade, has questioned how the huge budget deficit will be financed and how much needs to be borrowed from other markets. During a recent discussion, Schade noted that despite past efforts to curb expenditure, the gap between capital budget and borrowing exceeds this year’s parameters by far. 

“This is another benchmark that we need to focus on to bring this into positive territory,” Schade added, urging for a clear strategy to rein in the deficit and to overcome difficulties after years of using borrowed funds for operational expenses. 
Shiimi stated that funding for large scale infrastructure projects will continue to benefit from commitments signed with the African Development Bank. These include water security related projects as well as the Education and Training Quality Improvement Project. 
During the budget speech, Shiimi said primary industries are expected to contract further in 2020, due to an expected lower output from all the mining sectors and agriculture, forestry and fishing as the impact of Covid-19 takes its toll on global demand for commodities in all the sub-sectors. 

For 2020 the agriculture, forestry, and fishing sectors are estimated to contract further. “If a normal rainfall season prevails, the production of grains increases, then crop farming is expected to expand in 2020, while livestock farming is projected to contract albeit at slower rate as the sub-sector invests in restocking activities (at a slower pace due to reduced frequency of auctions as a measure in containing the spread of Covid-19),” said Shiimi. However, he pointed out that the sector is threatened by armyworms, fruit flies, and mouth and foot disease as well as the negative implications of the pandemic. 

Nevertheless, growth for 2021 is expected to recover and expand as restocking continues with increase in demand as the lockdown impact dissipates in livestock farming and crop farming as the sector goes into a recovery and rebalancing. 
The fishing and fish processing on board sector is estimated to contract as the impact of Covid-19 lockdown and travel restrictions takes its toll on the sector with reduced domestic and external demand in 2020. Growth in 2021 is expected to record a recovery as the sector is anticipated to rebalance and recover from the negative developments that affected its growth.
Overall, growth for primary industries during 2021 is expected to recover but remain contractionary due to lower overall output. Over the medium-term, the primary industries are expected fully recover from 2022 onwards and moderate with an average growth rate over the remainder of the medium-term.  

Furthermore, secondary industries are expected to fall into contraction in 2020 on the back of expected poor performance in manufacturing and construction as the impact of the travel ban and lockdown due to Covid-19 surges. 
The electricity and water sectors are however expected to expand on the assumption of increased production due to higher demand (lockdown) and increased capacity, promoted by the production from hydro-power and solar power plants coming on stream. For 2021 and beyond, growth in the secondary industry is expected to average around 2.5%, boosted by a recovery in construction and manufacturing.  
Tertiary industries are estimated to contract further in 2020, attributable to the impact of Covid-19 on hotels and restaurants (tourism), wholesale and retail as well as transport. These sectors were affected by the travel ban, partial and total lockdown from most of Namibian’s tourist origins, while the financial sector is expected to be affected through the loss of revenue and increase in non-performing loans coupled with the impact of the reduced repo rate. 

“Growth for 2021 is expected to rebound but still remain contractionary and record gradual moderate average growth over the medium-term. Growth (in tertiary industries) for 2021 is expected to be boosted by improvements albeit contractions in wholesale and retail trade repairs, hotels and restaurants and transport.  
ebrandt@nepc.com.na