This week an analyst commented on how the fiscal consolidation has been a necessary evil for the Namibian economy. That in itself is true, as the latest Fitch rating can attest. In revising Namibia’s economic outlook from negative to stable, while still affirming the sub-investment credit rating at BB+, where they pegged the country when they downgraded it from BBB- in November 2017, Fitch commented on how their decision was informed by the country’s commitment to stabilise debt and fiscal reforms.
That alone, however, should never be taken as a cause for celebration. Fiscal consolidation might have bolstered Namibia’s credibility in the international market by indicating that the country is able to pay back loans extended. But the real bread and butter challenges facing Namibians have not been properly addressed and to make matters worse, Fitch Ratings also says it foresees a contraction in the domestic economy.
The question, therefore, remains as to what are the unique economic policies Namibia is going to deploy to uplift the domestic economy in the coming quarters, and towards 2019.
So far, the consolidation efforts have done very little in terms of job creation and to encourage a true economic stimulation that benefits the real economy and tackles the social challenges weighing down heavily on society. Being attractive to outside investors and lenders is a good thing, but that alone does not feed, educate, heal and clothe poverty-stricken Namibians.
Of course, the Treasury, and specifically finance minister Calle Schlettwein, have been vocal on the issue, saying throwing money at the economic problems is not always the best solution, let alone sustainable.
But a response to that is needed fast because, as Fitch warned this week, things do not look all too well. The agency cut its 2018 growth forecast for the Namibian economy to 0.8 percent from the previously 2 percent, while the forecast for 2019 was revised to 1.8 percent from the 3 percent earlier forecast.
The fiscal consolidation, which is simply government measures to reduce deficits and stop debt accumulation, were introduced to halt the country from sliding further into the sink to a point where no investor or lender would touch the country, not even with a 10-foot pole.
It was not long ago, in fact it was as recently as 2014, when Namibia’s credit ratings were in one of the highest categories of minimal to very low credit risk. This was a classification that every country in the world aspires to but where few find themselves for sustained periods of time. In November last year Namibia was in a category that told the world of how investing in its economy is a good thing because we are simply a nation whose credit rating is of moderate risks. It is now time to unleash whatever magic wands we have to improve the mounting domestic challenges, in a way that the man on the street can also breathe a sigh of relief.