Africa Banking Economy Finance Namibia

IMF hopeful of Namibia’s economic recovery by next year

The International Monetary Fund says the Namibian government should continue freezing jobs, containing salaries and limiting public enterprises spending to improve prospects of economic growth.

This is according to a report released by the fund yesterday which expects economic recovery next year but warned that more action is needed to save Namibia’s failing economy.

Namibian economic growth has come to a halt over the few years due to rising macroeconomic imbalances, high public debt and declining international reserves.

The fund said the government should continue reducing general spending but increase income to improve long-term growth prospects of the economy “while protecting the poor”.

“Widening the coverage of children’s grants, better targeting of housing programmes, and a more progressive personal income tax would help protect the poor and strengthen the distributive role of fiscal policies. In this context, the Bank of Namibia should keep the policy rate broadly in line with the South African Reserve Bank’s rate and maintain the peg,” the fund said

The IMF commended the central bank’s decision to cut the Repo rate by 0,25 basis points to 6,5% in August deeming it as the appropriate action to manage public debt and stimulate economic growth, “but actions are needed to deliver the outcome”.

The IMF board added that it is important for Namibia to impose structural changes that reduce policy uncertainty and deploy measures that call for more inclusive growth.

They explained that the government should impose measures that lead to lowering compliance costs, reduction of electricity, and transportation costs by reforming public enterprises operating in these sectors.

The government was further called upon to contain its salary bill structure to better align productivity and avoid preferential procurement rules that are threatening domestic competition

The international fund however, cautioned that although the authorities are on the right track, public debt continues rising and the government’s growth financing needs are elevated.

The Bank of Namibia released an economic outlook report last month in which it revised earlier economic forecasts stating that the Namibian economy will slow down by 1,7% in 2019, before recovering to a positive growth of 0,8% and 1,2% in 2020 and 2022.

Source: The Namibian

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