The midterm budget review delivered by minister of Finance and Public Enterprises Ericah Shafudah presents a careful balancing act, a fiscal plan that strives to maintain credibility and discipline, even as political realities and slowing growth threaten to derail consolidation efforts.
The numbers tell a story of progress and prudence, but also one of fragility. The government’s ambition to keep public debt below the 70% of GDP threshold deserves recognition.
Yet, as economic analyst Almandro Jansen from Simonis Storm Securities cautions, election-cycle spending pressures could soon test the state’s fiscal resolve. With the 2026/27 elections drawing near, Namibia’s ability to resist the political temptation of expansionary spending will determine whether fiscal consolidation remains a promise or becomes policy.
A budget under strain
According to the midterm figures, Namibia’s borrowing requirement has surged to N$29.8 billion, more than double that of the previous fiscal year. The mix remains 80% domestic and 20% external, a prudent structure that shields the economy from exchange rate shocks. But this reliance on local borrowing is not without cost.
As Jansen notes, domestic liquidity is tightening as government debt absorbs a larger share of national savings. Local pension funds and insurers, the traditional buyers of Treasury paper, are nearing their exposure limits to sovereign debt. Once those limits are breached, Treasury will either need to raise yields (increasing borrowing costs) or diversify its investor base, likely turning to foreign lenders once more.
In essence, government is funding its operations by drawing deeper from the same domestic well. Unless that well is replenished through stronger growth and diversified investment, the risk of crowding out the private sectorbecomes real. Businesses already struggling with high interest rates and sluggish demand may find it even harder to access affordable credit.
Achievements amid constraints
Still, the review is not without its bright spots. Namibia’s successful redemption of the US$750 million Eurobond in October 2025, fully financed through domestic resources and the Sinking Fund, stands as one of the clearest demonstrations of fiscal discipline in recent memory. It avoided new external borrowing and stabilized confidence in Namibia’s debt management strategy.
As a result, public debt has stabilized at N$176.3 billion, or 67.5% of GDP, and is projected to remain below the critical 70% threshold. This sends an important signal to credit agencies and investors: Namibia is serious about sustainability.
Moreover, the government’s fiscal credibility has improved in structure if not in pace. The shift from rhetorical commitments to tangible fiscal action marks progress, especially in an environment where several SADC peers are struggling with debt distress and inflationary pressures.
The growth dilemma
The challenge, however, lies in the slower-than-expected economic growth. Real GDP has been revised down from 4.5% to 3.3%, a sharp moderation compared to the 5.4% rebound seen in 2022. While the slowdown is partly cyclical, reflecting softer commodity demand and weaker construction activity, it exposes a deeper issue: Namibia’s over-reliance on a few key sectors.
Sustained growth above 3% will depend on the pace of investment execution in energy, logistics, and housing, as Jansen highlights. These are not just sectors of opportunity; they are the backbone of inclusive economic expansion. Projects such as the green hydrogen initiative, port expansions, and affordable housing programmes must move from feasibility to implementation if Namibia is to avoid a protracted low-growth trap.
Private-sector confidence remains cautious. Bureaucratic delays, inconsistent procurement practices, and slow disbursement of development budgets continue to frustrate businesses. Unless these bottlenecks are addressed, the multiplier effect of public investment will remain limited, and growth will underperform potential.
Revenue realities
On the revenue side, the picture is equally sobering. By September, the government had collected N$36.6 billion, just 40% of the annual target, compared to 43% during the same period last year. This shortfall underlines persistent structural weaknesses. Namibia’s tax base remains narrow, and the country’s dependence on SACU transfers, which account for roughly a third of total revenue, leaves it vulnerable to South Africa’s fiscal health and regional trade flows.
VAT and income tax receipts have underperformed, reflecting weak consumer spending and subdued corporate profitability. Meanwhile, VAT refunds, particularly to exporters and oil exploration firms, have increased, further straining liquidity.
These revenue pressures, coupled with a budget deficit now widened to 6% of GDP from a forecast of 4.6%, reveal the limits of Namibia’s fiscal space. While the deterioration is largely due to temporary factors, notably the Eurobond repayment, it serves as a reminder that even disciplined budgets can bend under external shocks and underperforming revenues.
Inflation, interest rates, and investor sentiment
Inflation remains contained at around 3.8%, offering some relief to consumers and businesses. The repo rate of 6.50% signals a mildly accommodative stance, suggesting the Bank of Namibia recognises the need to balance inflation control with growth stimulation.
However, Namibia’s fiscal tightening, combined with limited external inflows, could constrain liquidity further, nudging interest rates upward. For small and medium enterprises, this environment remains challenging, access to affordable credit is tight, and government’s high domestic borrowing competes directly with the private sector for funding.
The politics of the purse
The greatest test will come in 2026, when the election cycle reaches full swing. History shows that election years often bring pressure for populist spending, salary adjustments, increased social transfers, and capital project acceleration. Simonis Storm’s assessment that a mildly expansionary fiscal stance through 2026 will precede a return to consolidation is logical, but risky.
The danger is that short-term political spending could reverse hard-won fiscal gains. Maintaining credibility with investors and rating agencies will require that expansionary measures remain targeted, transparent, and time-bound. Namibia cannot afford a repeat of past cycles where election spending left behind deeper deficits and slower recoveries.
A call for strategic discipline
The midterm budget confirms that Namibia’s fiscal strategy is on the right track, but on a narrow ridge. The government has managed to restore some confidence through prudent debt management and consistent policy messaging. Yet, without faster growth, stronger private-sector participation, and more efficient public investment, consolidation will remain precarious.
As the country approaches a politically charged period, fiscal discipline must not become the first casualty of campaign promises. The next 18 months will reveal whether Namibia can match its economic ambition with administrative discipline.
In short, the midterm budget shows that the government knows what to do, the question is whether it will stay the course when politics comes calling.
