A mission of the International Monetary Fund (IMF) led by Jiro Honda, visited Namibia from June 24 to July 7, to conduct the 2015 Article IV consultation with Namibia.
The mission met with the Prime Minister, Hon. Saara Kuugongelwa-Amadhila; Minister of Finance, Hon. Calle Schlettwein; the Governor of the Bank of Namibia, Mr. Ipumbu Shiimi; and other senior government officials, and representatives of the private sector and development partners.
At the end of the mission, Mr. Honda issued the following statement, “Namibia has broadly maintained robust growth since the global financial crisis, although growth in 2014 was somewhat weaker largely due to weak global demand for Namibia’s export items. For 2015, economic activities are expected to grow at about 5 percent, supported by mining production and strong activity in the construction sector.”
Namibia’s growth prospects are increasingly clouded with downside risks. The main near-term risk is associated with the highly volatile Southern African Customs Union (SACU) revenues. In the coming years, the SACU revenues are expected to decline, reflecting the slowdown in the South African economy. Further increase in the current account deficits would continue to erode already low international reserves at end-April 2015 the mission noted with concern.
“In light of this risk, the mission encourages the authorities to shift toward a tight fiscal policy stance. While safeguarding critical social and development needs, a tight fiscal policy is recommended to build an adequate international reserve buffer of 16 to 20 percent of Gross Domestic Production or 3 to 5 months of import cover over the medium term, which would enhance Namibia’s resilience to future shocks. To this end, the mission welcomes the authorities’ intention for fiscal consolidation. To help implement a prudent fiscal policy, the mission also encourages the authorities to enhance their efforts for public financial management reforms and to further strengthen tax administration,” said Honda.
“Recent housing market development is another emerging risk. Fast growth in real estate prices, combined with the high concentration of banks’ mortgage lending, pose risks to the financial sector and the economy. To address risks associated with the housing market, the mission encourages the authorities to consider various targeted macroprudential policies, as needed. The mission acknowledges that the Bank of Namibia is considering taking some policy steps,” Honda said in conclusion.