After a constant period of high economic growth with an average of not less than 5% per annum over the period 2010-2015, Namibia experienced a slowdown in real gross domestic product (GDP) in the past four years .
Growth slowed down from 5.3% in 2015 to 0.0% in 2016 and the trend continues up to date.
The lack vibrant economic performance continued over the subsequent four years: -1.0% in 2017, 1.1 in 2018 , -1.6% in 2019 and -7,3% in 2020, driven by weak commodity prices, persistence of drought and subdued economic activity in South Africa and Angola.
According to latest official estimates, the economy contracted by -7.3% in 2020, amidst the ongoing global COVID-19 pandemic and lockdowns.
Namibia’s Vision 2030 articulated the country’s long term development plan while the National Development Plan (NDP) mapped out its medium term implementation framework.
The fourth phase of the NDP was designed to help the country achieve three main goals: high and sustainable economic growth, job creation, and reduction of income inequality.
The emerging challenges were compounded by weaknesses in the public financial management (PFM) environment that impacted on resource mobilization and reduced the quality and efficiency of public spending and deep rooted structural challenges in the business environment that limited capacity for industrialization and economic diversification, resulting in high rates of unemployment, poverty and income inequality.
Against this backdrop, the overall objective of the Economic Governance and Competitiveness Support Programme (EGCSP)was to support the implementation of the Namibian government’s wide ranging reforms and medium term development agenda, by accelerating inclusive growth and sustainable development, preserving macroeconomic stability, and addressing the challenges of lack of diversification, high unemployment and income inequality.
The package of reforms proposed under the three components of the EGCSP fully corresponded to Namibia’s national priorities for development, particularly its aim for sustainable economic advancement and job creation he purpose of the EGCSP was to promote inclusive growth and economic competitiveness and diversification through improved economic management and business environment reforms.
The EGCSP was provided at a time when Namibia was experiencing an economic slowdown in real GDP growth rate from 5.3% in 2015 to 0.0% in 2016.
The fiscal deficit widened from 3.7% of GDP in FY2013/14 to 8.3% of GDP in FY2015/16, financed through domestic and external borrowings.
In view of the situation, the Government of Namibia embarked on fiscal consolidation from the second half of FY2016/17 to safeguard macroeconomic stability.
While this was necessary, it contributed to the sharp fall in aggregate demand, and hence growth. At the same time, the Government embarked on wide ranging reforms aimed at improving the performance of state owned enterprises and the business environment.
The fiscal consolidation efforts targeted expenditure control and efficiency and improving revenue performance.
These have yielded minimal results as it helped to push fiscal consolidation measures, resulting a significant reduction in the budget deficit from 8.3% of GDP in 2015/16 to 4.9% in 2019/20, a decrease in the Expenditure/GDP ratio from 40.2% in 2015/16 to 34.9% in 2018/19; and significant improvement in foreign reserves from 2.8 months of import cover in 2016 to 5.2 months by 2020.
The Namibia Revenue Agency (NAMRA) Act was passed by Parliament in 2017, establishing the Agency, its powers, functions and management and steps were taken to contain the wage bill–Payroll audits started at the Ministry of Education and the Prime Minister has issued a circular freezing new recruitment.
Despite the a fore mentioned fiscal consolidation efforts by the Government, Namibia’s sovereign ratings have been downgraded by Moody’s and Fitch since 2017,reflecting the country’s high debt burden and weak economic growth prospects.
Namibia’s fiscal deficit for 2020/21 is expected to widen to 9.9% of GDP from 4.5% of GDP in 2019/20, due in large part, to a surge in expenditure and headwinds to fiscal revenues as the global Covid-19 pandemic weighs on economic activity.
The Government is expected to resume fiscal consolidation from FY 2021/22, resulting in the deficit gradually narrowing in the near future.
The EGCSP has supported a wide range of measures aimed at strengthening public financial management and public sector efficiency.