The International Monetary Fund (IMF), once again urged the government not to allow debt to grow unsustainable and to continue cutting spending.
This statement was made by the fund yesterday, after having concluded its Article IV consultations.
These consultations are intended to assess economic and financial developments and discuss the country’s financial and economic policies with central bank officials and government officials.
The IMF staff missions often meet with representatives of parliamentarians and business, labour unions, civil society, and other representatives.
Giorgia Albertin (IMF lead mission chief), stated that the country should continue implementing the fiscal consolidation strategy as it is vital to maintain debt sustainability.
Namibia’s debt is expected to rise to N$140 billion by end of fiscal year. Moreover, borrowing has increased in the last months, with millions of dollars being swept off the markets.
Albertin stated that consolidation must allow growth, and not reduce expenditure from the most vulnerable sector of the local economy.
She emphasised that the state needs to continue “containing the wage bill, advancing the reform of state-owned enterprises, and strengthening tax administration”.
Albertin stated that if the country’s debt levels are not addressed, it could lead to slow economic growth. The only way out of this unfavorable state is fiscal consolidation. This will bring the country back to stability.
“This consolidation should not go in the way of provision of necessary services, and the wage bill, containing earning items such as travel allowances, could assist in taming the bill,” said the Italian economist.
According to the IMF: Protecting macroeconomic stability, advancing structural changes, and protecting the most vulnerable are all key factors in fostering private sector-led inclusive growth and reducing inequality.
“In parallel, it is important to preserve social spending and growth-supporting public investment and mitigate the impact of higher food and fuel prices on the poorest. Strengthening the public financial framework will support fiscal consolidation,” said the fund.
Other items included in the note include a note addressed to the Bank of Namibia, stating that inflationary pressures will rise and that maintaining a policy rate broadly aligned at the South African Reserve Bank rate and adequate reserves will support the currency pg and anchor inflation.
“Strengthening the resilience of the financial sector and managing macro-financial risks will support financial stability.”
Albertin noted that Namibia has been spared from a much greater inflation rate by keeping the one to one peg with South African rand.
Another note is that structural reforms are needed to support economic diversification, and increase productivity.
“Improving the business climate, fostering access to finance, strengthening governance, and reducing skills mismatches is key to foster growth,” said the fund.
The fund projects that Namibia’s economy will grow by 3% in 2022, and by 3,2% in 2023.
The complete consultations report will be made public in due course.
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Source: namibian
