Africa-Press – Namibia. Government, through the finance ministry, is actively reducing the country’s reliance on external borrowing in favour of prioritising the domestic financial market. Currently, government’s borrowing plan involves financing debt with 80% from domestic sources and borrowing and 20% from external sources.
Also, most of Namibia’s external debt is denominated in South African Rand to avoid exchange rate exposure. For the 2025/26 fiscal year, Namibia increased its net domestic borrowing plan, to approximately N$17.3 billion.
Government, through finance minister Ericah Shafudah (ES), has also reiterated it is not considering any drastic expenditure cuts, as this would have severe and lasting implications on the livelihood of society, given most of the expenditure goes to social spending.
New Era’s Head of Business and Lifestyle, Edgar Brandt (EB), recently asked Shafudah how she intends to reign in government debt while ensuring sustainable growth:
EB: What are the key drivers behind Namibia’s rising public debt, and how does the finance ministry plan to address these drivers in the short and long term?
ES: Generally, there are multiple drivers of debt in developing countries like Namibia including external and internal induced factors. The recent factors that drove debt in Namibia include increased needs of resources required to fund infrastructure development (investment in roads, energy, education, water and healthcare) and sustaining expenditure on social safety. The other drivers include external shocks that reduced revenue while expenditure remains at the same level or increased to mitigate impacts of external shocks on the economy and households. These shocks were for example Covid-19, commodity price shock/volatility and geopolitical tension (Russia/Ukraine) that affected prices of and demand for essential commodities both imports and exports.
EB: What is your perceived timeline or roadmap for how government plans to reduce the debt-to-GDP ratio?
ES: The medium-term roadmap to reduce the government debt is laid down in the Fiscal Strategy for the Medium-Term Expenditure Framework (MTEF) 2025/2026-2027/2028, but it did not start there. This is reflected in the sustained primary budget surplus over the MTEF. The budget surplus signifies Government’s commitment to prudent financial management while paying off debts and investing in the future generation. In this regard, you will observe that despite the increase in the nominal term, the stock as ratio of GDP is decreasing from 66 % to about 61.4% in 2027/2028.
EB: To what extent will fiscal consolidation measures remain part of our domestic debt reduction strategy, and how do you plan to balance consolidation with social service delivery needs?
ES: Fiscal consolidation is a measure of managing expenditure, to ensure that expenditure do not explode. The underlying principle of fiscal consolidation is to ensure that Namibia’s public finances remain sustainable in the long term and debt stock remains stable to maintain economic stability. Evidently, fiscal consolidation policy is not just about debt sustainability but includes revenue mobilisation, prudent public finance management as well institutional and structural reforms, among others. Therefore, fiscal consolidation is a necessary tool to manage public finance and instill discipline in spending allocations.
EB: Are there any plans to implement or adjust tax policies to increase revenue and help reduce debt? If so, which sectors are being considered?
ES: The principal objective of tax policy is not to reduce debt but to mobilise resources needed to advance economic growth and development. Hence, the tax policy measures announced in the budget are not targeting debt reduction but necessary tools to promote economic growth and social welfare of the citizens. For details, please consult the Budget Statement for the FY2025/2026.
EB: Is the government considering any expenditure cuts or efficiency improvements within the public sector to ease the fiscal burden?
ES: As indicated above, the government is not considering drastic expenditure cuts, as these have implications on the livelihood of society given that most of the expenditure goes to social spending. If we do that, it will reverse the gains that we have already achieved in the fight against poverty. However, the government will seek efficiency in spending to make sure money is spent on social projects with high returns and leakages are eliminated.
EB: How does the finance ministry plan to manage State-owned enterprises (SOEs), some of which are seen as financially unsustainable? Will restructuring or privatisation of SOEs be considered?
ES: The Government, through the Ministry of Finance, has embarked on a strategic reforms process aimed at enhancing the efficiency, accountability, and sustainability of public enterprises that include the Ownership Policy. Another critical pillar of these reforms announced in the current budget is the reintegration of commercial PEs back into their respective line ministries.
This policy approach aims to eliminate duplication of functions, reduce overhead costs, and strengthen policy coherence between ministries and the entities operating within their sectors.
EB: Will the government reduce reliance on external borrowing, and what steps are being taken to manage existing debt more sustainably?
ES: The government has already reduced reliance on external borrowing. Currently, the government borrowing plan involves financing government debt with 80% from domestic borrowing and 20% from external sources. Most of the external debt are also denominated in Rand to avoid exchange rate exposure.
If you look in the Fiscal Strategy 2025/2026-2027/2028 will observe that from FY2025/2026, the external debt further reduced to below 15 percent after the redemption of the Eurobond, further reflecting government’s commitment to prudent management of government debt.
EB: How is Namibia working with multilateral institutions such as the IMF or World Bank to manage or restructure debt?
ES: Namibia does not have a programme with IMF or World Bank on managing debt. The cooperation between Namibia and the Bretton Wood Institutions (IMF & WB) are of statutory in nature where these institutions provide technical and advisory services on general economic developments as a shareholder in terms the Articles of Agreements establishing those institutions.
EB: Can you share details on Namibia’s domestic borrowing plans, and how they will impact the local financial markets and private sector credit access?
ES: For the 2025/26 fiscal year, Namibia has increased its net domestic borrowing plan, to approximately N$17.3 billion. This marks a notable escalation compared to previous fiscal periods, reflecting the government’s strategic shift toward mobilizing resources from domestic market.
A key motivation for this elevated domestic issuance is to bolster the Eurobond sinking fund in preparation for the October 2025 Eurobond maturity. By front-loading domestic borrowing, the government aims to alleviate future external debt service pressures while reducing its reliance on volatile international capital markets, same time providing investment opportunities to our local investors.
EB: What are government’s strategies to grow the economy in a way that naturally reduces debt levels through increased revenue collection?
ES: As indicated above, the government is currently developing new industries in green industrialisation and energy sector, through investment in power generation capacity, water, and transport as well as projects in the agricultural sector as stipulated in budget speech. There is also a lot happening at the coast with offshore exploration of oil and gas, while at the same time, the government pursue the public-private partnerships.
EB: How does the ministry intend to attract more private sector investment, particularly in high-potential sectors such as energy, mining and tourism?
ES: The Ministry implements policy and structural reforms to create business friendly environment where private sector grow and prosper. The ensures that the tax policy is fair and not punitive to allow the private sector to reinvest in the economy.
EB: Will there be targeted incentives or policy reforms to support SMEs and job creation, which could enhance tax revenue over time?
ES: Government have SMEs, programmes in place such as the SME financing strategy and need only to be strengthened going forward. The Government, as announced by the Her Excellency the President is developing the Youth Development Fund. These are in addition to many programs offered by our development institutions, such as DBN and Agribank. Government further reformed public procurement to benefit the SMEs and local businesses, where they get preferences in public procurement.
We are also introducing a new reduced corporate tax rate for SMEs at 20%, so that SME can reinvest more into their business.
EB: What measures are being taken to ensure transparency and accountability in the use of public funds during the debt reduction process?
ES: Transparent measures and accountability start with the budgeting process, by making sure the budget process is inclusive and transparent, through public consultations. The ministry then must account for money spent through accountability reports and audit reports tabled in parliament for scrutiny.
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