The International Monetary Fund (IMF) states that Namibia needs to optimise and simplify governmental processes and workflows to reduce inefficiencies, lower operational costs, and enhance productivity.
“To achieve its growth potential and tackle unemployment, which is especially high for the young, Namibia needs to streamline its public sector, and address the public wage premium to foster a more diverse and dynamic economy that both creates jobs and reduces poverty and inequality,” reads a statement released by the IMF last month.
This followed the IMF’s bilateral discussions on economic developments and policies in Namibia which were concluded with Namibian officials in October 2023.
These triple challenges have been haunting Namibia for some time now, and the country is keen on finding ways to address these.
According to the IMF’s analysis, Namibia’s fiscal stance in FY23/24 has appropriately tightened, with part of the Southern African Customs Union (SACU) revenue windfall used to expand social programmes, and part of it saved as a precautionary buffer.
“Although this tightening helped contain the rise in public debt, the public sector wage bill and debt service still consume the bulk of the budgetary resources, despite the measures taken since FY21/22 to contain public wage bill expansion,” the IMF added.
Meanwhile, Namibia’s current fiscal stance is more expansionary than warranted, given the need to curb the public debt-to-GDP ratio.
The overall risk of debt distress is moderate, said the IMF. Nonetheless, the fund added that consolidation is pivotal to increase fiscal space to confront future shocks, expand social safety nets, finance needed infrastructure upgrades, and improve external competitiveness.
Tabling the mid-year budget review last year, finance and public enterprises minister Iipumbu Shiimi cautioned that the public debt servicing bill has increased beyond anticipated levels in the main budget. This was as the debt portfolio rose, coupled with prevailing tight financial conditions.
The escalating debt means Namibia is paying about N$1.7 billion more, up to a total N$11.8 billion, or equivalent to 15% of projected revenues for the year, just to service the national debt.
“The sharp increase in interest costs reflect unanticipated sharp movements in money market rates, relative to the increase in the benchmark rates. Debt servicing costs continue to absorb an increasing portion of the resource envelope, now exceeding expenditure on key social services such as health and social protection,” said Iipumbu at the time.
During FY2023/24, the public debt stock was expected to increase to N$153.8 billion, equivalent to 66% of GDP, a slight improvement from 67.9% in the previous financial year.
Going forward, the IMF recommended that a systematic approach to public employment and its remuneration is critical: keeping and attracting needed talent for an efficient public sector while strategically downsizing in non-critical areas.
“Authorities are encouraged to complete the ongoing functional review of the civil service, and finalise the modalities of the early retirement scheme. These foundational elements of the much-needed civil service reform would help anchor the authorities’ ambitious medium-term fiscal consolidation plans, which go appropriately beyond just containing the public debt-to-GDP ratio,” the IMF advised. -mndjavera@nepc.com.na