Windhoek: The Executive Board of the International Monetary Fund (IMF) has concluded its Article IV Consultation with Namibia. The authorities have agreed to publish the Staff Report prepared for this consultation, highlighting key economic developments and challenges facing the country.
According to International Monetary Fund, Namibia’s economic growth has slowed from 5.4 percent in 2022 to 3.7 percent in 2024. This deceleration is primarily due to a decline in production linked to lower diamond prices, which has overshadowed the positive impact of rising gold and uranium prices. In 2024, oil exploration activities stabilized following a surge in 2023, while the agricultural sector experienced a significant contraction due to the severe drought of 2023-24, noted as the worst in a century. Inflation has decreased, driven by a reduction in food and fuel prices on international markets.
Looking forward, Namibia’s growth is expected to remain moderate in both the short and medium term. Although the end of the drought is anticipated to provide a growth boost in 2025, increased global trade policy uncertainty, especially concerning U.S. tariffs, and a weak diamond market are likely to hinder momentum. Growth is projected to be 3¾ percent for 2025 and 2026, and approximately 3 percent over the medium term, constrained by structural issues despite higher public capital expenditure. Average consumer price index (CPI) inflation is forecasted to ease to 4.1 percent in 2025 and stabilize around 4.5 percent in the medium term.
IMF Directors have commended Namibia’s commitment to fiscal discipline and efforts to create room for growth-enhancing measures. They emphasized the need for sustained and more extensive fiscal consolidation over the medium term to cement favorable public debt dynamics and bolster the external position. Directors urged the acceleration of fiscal reforms, including comprehensive civil service reform to manage the wage bill, reforms of state-owned enterprises, enhancement of public financial and investment management, and improvement of tax administration to reinforce fiscal consolidation. Additionally, they recommended boosting public investment to spur growth, expanding social protection, and building resilience to weather-related shocks.
In the absence of capital outflows, Directors advised gradually aligning the policy rate with that of the South African Reserve Bank (SARB) to protect the currency peg, leveraging SARB’s rate cuts. They emphasized, however, that the Bank of Namibia should remain alert to economic conditions.
Directors also recognized progress in strengthening financial sector resilience, particularly through the introduction of the bank resolution policy. They encouraged continuous monitoring of risks, including those from the sovereign bank nexus and household debt, and recommended finalizing additional policy measures such as counter-cyclical capital buffers and enhanced crisis resolution cooperation. Ongoing efforts to fortify the anti-money laundering and combating the financing of terrorism (AML/CFT) framework are essential for expediting removal from the Financial Action Task Force (FATF) grey list.
Directors stressed the importance of bold structural reforms to promote sustainable, inclusive, and private sector-led growth and to improve external competitiveness. They recommended tackling key barriers by improving human capital, reducing skill mismatches, enhancing the business climate, strengthening governance, and promoting digitalization. Directors supported the development of policies aimed at leveraging potential oil, gas, and green hydrogen resources for economic diversification and job creation.
The next Article IV Consultation with Namibia is expected to occur on the standard 12-month cycle.