Chamwe Kaira
All eyes will be on revenue projections when finance minister Erica Shafudah tables the 2026/27 national budget in Parliament today, as economists warn that limited income growth could force tough spending decisions.
Capricorn Group chief economist Floris Bergh said the key issue will be how much revenue the government expects to collect in the 2027 financial year. He noted that the October 2025 estimate projected almost no growth, with revenue at N$90.5 billion.
“If that is still the case, expenditure will have to be curtailed decisively; otherwise, the deficit will balloon to a confidence-eroding level that will be a challenge to finance,” said Bergh.
On the budget deficit, Bergh said the outcome remains uncertain.
“Nevertheless, we trust, or hope, that it will be contained to a maximum of 4% of GDP (3% would be ideal). This amounts to N$12 billion, which is the average deficit of the past five post-Covid fiscal years. Otherwise, our credit rating will not improve and the economy-wide cost of capital will remain high.”
He added that Capricorn wants more clarity on the government’s plan to use state-owned enterprises to drive economic growth.
“That is, how their effectiveness and governance will be improved. The idea is that SOEs will have to fund themselves on the back of government guarantees. Government hopes that significant off-balance-sheet concessional finance will be successfully accessed.”
Standard Bank Namibia economist Helena Mboti said the budget will likely remain cautious. She pointed to the 2025/26 framework, which projected revenue of about N$92.6 billion, expenditure of N$89.4 billion, a deficit of N$12.8 billion or about 4.6% of GDP, and public debt near 66% of GDP.
Looking ahead to 2026/27, she expects revenue growth of around 2%, driven mainly by improved tax administration rather than once-off gains. She warned that Southern African Customs Union (SACU) revenue volatility and diamond sector performance remain key risks.
On spending, Mboti said operational pressures are increasing.
“The recently announced 5% wage increase will push up the operational budget, while the policy shift to channel PSEMAS beneficiaries toward public hospitals will require additional spending on personnel, medicine and facility capacity to absorb higher patient volumes.”
She said free tertiary education will also add to long-term operational costs. Operational expenditure, currently around N$80.6 billion, is likely to rise.
While there may be some adjustments to social grants, Mboti said these will probably remain largely unchanged.
The development budget, which was reduced during the mid-year review because of low execution, could increase slightly if implementation improves.
“The government has emphasised execution and efficiency as priorities for this administration, and we could therefore see renewed focus on infrastructure linked to diversification and oil and gas readiness, including ports, rail and road infrastructure.”
She said health and education facilities may also require upgrades to support new policy commitments, which would mean short-term capital spending.
“The deficit is likely to be maintained at around 4% of GDP in line with the medium-term consolidation path, although this will depend on whether operational expenditure is reprioritised to create room for new commitments. Potential areas of restraint could include non-critical goods and services, travel, consultancy spending and slower expansion of non-essential programmes.”
Mboti said the most likely outcome is a deficit stabilising around 4% of GDP, though the situation remains fragile.
“Contained expenditure ceilings, incremental improvements in revenue administration and potentially easing borrowing costs, if emerging market sentiment improves, could support consolidation. However, risks remain significant, including SACU revenue shocks, commodity price volatility, growth underperforming interest rates and continued development underspending. Absent a major external shock, stabilisation near the 4% mark appears ambitious but achievable, but meaningful narrowing will require stronger growth momentum.”
She described the core challenge in the 2026/27 budget as balancing fiscal consolidation with structural transformation under the Sixth National Development Plan.
“Yet operational spending continues to crowd out development expenditure, implementation capacity constraints persist and debt servicing absorbs a significant share of revenue.”
She said observers should watch for a clearer oil and gas fiscal framework, funding for youth employment programmes, reforms to improve development execution, wage bill control alongside necessary expansion in health and education spending, and a clear debt stabilisation plan.
“In essence, the budget is likely to be fiscally conservative and politically aligned with youth employment and oil and gas participation objectives. It will be realistic in short-term accounting terms but potentially development-constrained unless growth accelerates. Debt stabilisation is achievable, but only if economic growth consistently exceeds borrowing costs and revenue mobilisation strengthens. If energy sector momentum translates into broader economic expansion, fiscal space will improve. If not, consolidation efforts risk constraining Namibia’s structural transformation ambitions,” said Mboti.
Economist Mally Likukela of Twilight Capital Consulting said public debt is projected to rise to N$177.1 billion, or 67.5% of GDP, by the end of the 2025/26 fiscal year, based on Bank of Namibia forecasts.
“The mid-year budget review indicates that rising interest payments, estimated at N$14.4 billion (15% of revenue), are driving the need for tighter fiscal management.”
As the minister rises to present the budget, the central question remains whether revenue growth will be strong enough to contain the deficit near 4% of GDP while meeting rising wage, health and education commitments without pushing debt to higher levels.
