WINDHOEK, Oct. 31 (Xinhua) -- The Namibian economy is estimated to grow by 3.5 percent in 2023 before slowing to 2.9 percent in 2024, up from previous estimates of 3.2 percent and 2.2 percent, respectively, Finance Minister Iipumbu Shiimi informed lawmakers on Tuesday.
Emphasizing the resilience of the domestic economy despite global vulnerabilities, Shiimi said that the Namibian economy, despite high global inflation and tight financial conditions, is outperforming some of its peers. However, he said that as a small and open economy, Namibia remains highly susceptible to external risks.
While the risks to the domestic economic outlook have somewhat diminished, Shiimi said that volatile global commodity prices still pose a threat to both domestic output and taxes. Moreover, he said that depreciating real income for households, coupled with high inflation and interest rates, poses a risk to consumption, as real incomes are expected to remain subdued in the short to medium term. Drought and water supply constraints were also identified as potential threats to domestic crop and electricity production.
Despite the challenges, Shiimi said that the positive economic outlook presents an opportunity for Namibia to adapt to medium-term risks and implement targeted policy measures to enhance resilience and future growth prospects. He underlined the immediate focus of fiscal policy, which is to protect the economy and the well-being of the most vulnerable segments of society, particularly in light of the ongoing drought.
Shiimi also warned that the cost of servicing public debt has exceeded the levels anticipated in the main budget, resulting in a revision of interest payments upward by 1.7 billion Namibian dollars (about 90 million U.S. dollars) to 11.8 billion Namibian dollars (about 626 million dollars) in the financial year 2023/24, equivalent to 15 percent of projected revenues for the year.
The total debt stock currently stands at 142.7 billion Namibian dollars (about 7.5 billion dollars), which is equivalent to 67.9 percent of GDP. In nominal terms, debt has grown by 13.5 percent, outpacing the growth in nominal GDP, recorded at 11.1 percent over the same period.
To achieve long-term debt sustainability, Shiimi stressed the need for fiscal policy to ensure that the nominal growth in debt remains lower than the growth in nominal GDP. Therefore, containing the pace of public debt growth should remain a top priority for fiscal policy in the upcoming medium-term expenditure framework. ■