Josef Kefas Sheehama
It is worth remembering that the word ‘credit’ comes from the Latin word for trust, which underpins the financial system.
Namibia is ranked 10th according to the Sovereign Debt Vulnerability Ranking.
The agency estimated that Namibia debt triumphs at approximately 69% of the country’s Gross Domestic Product.
We know that borrowing makes sense for the rich and poor if it finances schools, hospitals as well as physical and digital infrastructure.
These are smart investments that can boost potential growth and improve the economic wellbeing of all Namibians.
Building trust in sovereign borrowing is now more important than ever.
The bottom line is that high debt burdens have left many governments more vulnerable to a sudden tightening of global financial conditions and higher interest costs.
Furthermore, rapidly growing debt burdens could jeopardise the development goals, as government spends more on debt service and less on infrastructure, health and education.
High debt can also create uncertainty, which deters investment and innovation.
Given the extent of fiscal consolidation now required expenditure reductions and tax increases are necessary to stabilise debt.
Unemployment causes a decrease in government revenue. Therefore, more job creation means more government revenue increase, and it can use portion to finance its debt. Hence, in the active scenario, government stabilises debt through a combination of reforms that boost economic growth and measures to increase revenue collection and lower expenditure.
Moreover, as independent economic and business analyst doing research in the political economy and international economics, I can confidently argue that Namibia shall not default less probability of default as far as sovereign debt is concerned, and the fastest way to avert is by addressing our economic challenges with an immediate focus on policies that will raise Namibia’s potential growth.
Therefore, a sustainable trajectory for the Namibian economy is one where reforms are implemented to raise Namibia’s potential growth rate.
Developing new policies and sharing fresh ideas can help move the sovereign debt needle in the right direction.
Implementing flexible industrial and trade policy to promote competitiveness and facilitate long-run growth should continue being a strategic policy focus area.
Successful industrial and trade policy should be focused, flexible and premised on the notion of embedded autonomy.
Focused industrial and trade policy requires the prioritisation and rationalisation of interventions, and flexibility comes from learning from experience.
Focus and flexibility must be underpinned by embedded autonomy, which demands that the government elicits useful information from the private sector, which has the best knowledge of industrial and trade opportunities.
Manufacturing is an engine of economic growth, as industrial goods have a higher income elasticity of demand, especially in world markets.
The government should urgently implement a reform that can boost Namibia’s growth in the short term, while also creating the conditions for higher long-term sustainable growth. These growth reforms should promote economic transformation, support labour-intensive growth and create a globally competitive economy. The current state of the Namibian economy is unsustainable. Low economic growth entrenches poverty and inequality.
High income inequality aggravates social fragmentation and poses a risk to economic growth.
Inequality contributes to extremely divergent views, which make compromises difficult; the resulting stalemate and policy uncertainty can contribute to economic weakness.
A growth-oriented policy agenda must be accompanied by interventions that change how the benefits of growth are distributed and fundamentally transform the systems and patterns of ownership.
Initiatives that transform the economy must meet the dual tests of sustainability and intergenerational equity.
In other words, economic transformation must be implemented in a manner that does not compromise the long-term ability.
This means that at the heart of our economic policy must be a concurrent emphasis on economic transformation, inclusive growth and competitiveness, as this offers the most sensible strategy to address the challenges of unemployment, poverty and inequality.
Namibia suffers from stubbornly high levels of unemployment that are compounded by inefficient spatial patterns that makes participation in the formal and informal economy costly and difficult for individuals.
Agriculture makes it important in the pursuit of inclusive, labour-intensive economic growth, its rural linkages, ability to absorb less-skilled labour, large multipliers due to extensive links with the rest of the economy, competitive labour productivity and importance for export-led growth.
A growing agricultural sector can, therefore, help address our challenges of unemployment and low growth while countering rural poverty.
Tourism is one of the key sectors that can deliver inclusive growth through its labour absorption potential.
Tourism is characterised by low barriers to entry, as most tourism businesses are small, providing services such as accommodation, tour guiding, day tours and taxi services, an important aspect of its contribution to inclusive growth and economic transformation.
Furthermore, rebuilding business confidence is a fundamental starting point to resuscitating investment.
Private enterprises are the chief agents in creating employment, providing funds, building competitiveness and driving innovation.
The private sector’s role in encouraging a country’s growth and economic development cannot be overstated.
Private investments by the corporate sector are critical to higher growth rates and economic development.
Effective partnerships between the government and private sector in critical areas of infrastructure and long-term investments would expedite development.
Corporates are integral to fostering innovation and entrepreneurship and ensuring the future progress of an economy.
In future, Namibia will need further fundamental reforms for more robust and inclusive growth.
The focus needs to be on creating a business environment more conducive to private investment and job creation.
This requires improved governance, reducing the cost of doing business, making goods and services markets more open to competition, allowing companies to compensate workers in line with their skills and productivity, and making state-owned service providers more efficient.
Therefore, success of Namibia’s trade policy and strategy will, in the end, be measured by the extent to which it contributes to government’s overall socio-economic objectives of industrial diversification and upgrading, as well as employment creation.