Staff Reporter
The International Monetary Fund (IMF) has urged Namibia to implement bold, weather-shock-resilient structural reforms to stimulate employment, alongside a comprehensive strategy to harness the potential opportunities arising from recent oil discoveries.
These recommendations follow the IMF’s 2025 Article IV Consultation—a yearly review of Namibia’s economy and policy direction.
According to the assessment, Namibia’s economic growth slowed from 5.4% in 2022 to 3.7% in 2024, as reduced diamond production in response to falling prices outweighed the positive momentum from rising gold and uranium prices. The report also noted that oil exploration plateaued in 2024 after a surge in 2023, while agriculture contracted sharply due to the 2023–24 drought—reported as the most severe in a century. Inflation has declined, the report continued, reflecting falling food and fuel prices in international markets.
“Looking ahead, growth is projected to remain subdued in the near and medium term. The end of the drought is expected to boost growth in 2025; however, increased global trade policy uncertainty, particularly related to U.S. tariffs, and the weak diamond market will dampen momentum, with growth forecast at 3¾% for 2025 and 2026. Over the medium term, growth is projected to be about 3%, constrained by structural rigidities despite increased public capital expenditure. Average CPI inflation is projected to ease to 4.1% in 2025 and remain around 4.5% in the medium term,” the IMF added.
The IMF warned of several risks to Namibia’s outlook, including fluctuating global commodity prices, worsening trade tensions, and tighter financial conditions. Domestically, the Fund added, high unemployment, inequality, and weather-related shocks could also pose challenges. However, according to the IMF, faster development of oil, gas, and green hydrogen projects could yield positive gains.
Despite a challenging external environment, the IMF acknowledged Namibia’s resilience, noting lower inflation and a stronger external position. It welcomed the government’s commitment to inclusive growth and climate adaptation.
“Noting the subdued growth outlook reflecting global trade policy uncertainty and domestic structural rigidities, high unemployment, and inequality, Directors emphasised the need for further efforts to harness Namibia’s economic potential and raise per capita income by promoting a private sector-led, inclusive, weather-resilient, and diversified economy,” the report continued.
The IMF also encouraged Namibia’s commitment to maintaining fiscal discipline and creating space for growth-enhancing measures, calling for sustained and larger fiscal consolidation over the medium term to entrench favourable public debt dynamics and strengthen the external position.
However, it stressed the need to accelerate fiscal reforms, including enacting a comprehensive civil service reform to contain the wage bill, state-owned enterprise reforms, strengthening public financial and investment management, and enhancing tax administration to solidify fiscal consolidation.
At the same time, the IMF recommended increasing investment in infrastructure, expanding social protection, and preparing for future climate shocks. It also supported efforts to build a strong governance framework for the new sovereign wealth fund and to manage natural resources wisely to support long-term growth.
“In the absence of capital outflows, Directors recommended gradually aligning the policy rate with that of the South African Reserve Bank (SARB) to safeguard the currency peg, taking advantage of SARB’s rate reductions. They stressed, however, that the Bank of Namibia should remain vigilant to economic conditions,” the report reads.
The IMF praised progress in strengthening the financial sector, particularly the introduction of new bank resolution rules. It encouraged continued monitoring of financial risks and finalising tools such as counter-cyclical capital buffers and crisis response plans.
“Directors highlighted that bold structural reforms are essential to fostering sustainable, inclusive, and private sector-led growth and improving external competitiveness. They recommended addressing key barriers, including improving human capital and reducing skill mismatches, enhancing the business climate, strengthening governance, and fostering digitalisation. Directors supported developing a set of policies aimed at harnessing prospective oil, gas, and green hydrogen resources for economic diversification and job creation,” the report adds.
