The International Monetary Fund (IMF) has given Namibia a cautious and qualified thumbs up after its latest Article IV consultation. But it has raised concerns over the country’s sharply rising public debt that would amount to about 18% of gross domestic product (GDP) if income from the common customs pool was excluded.
Article IV consultations are an assessment of a member country’s economic health and serve to highlight future problems.
Namibia appears to have weathered the 2008-2009 economic storm well, posting a healthy 6.6% growth in GDP for 2010. But a slowdown in demand for minerals and extensive flooding in northern Namibia in early 2011 could depress growth to about 3.5% to 4% of GDP, the IMF’s report, released last weekend, stated.
Although the country’s banks, mostly South African-owned, appeared to be well insulated from the economic shocks induced by the subprime mortgage crisis, they continue to be heavily exposed to the local housing market. Namibian house prices had increased four-fold since 2000, the IMF said and it urged the Namibian government to rein in its spending and improve the monitoring of its so-called targeted intervention proÂgramme for employment and economic growth, a R14.9-billion stimulus programme that aims to create 104 000 new jobs annually.
It warned that the programme would lead to strong growth in domestic demand and imports, and price inflation, which could undermine the country’s external debt and affect its competitiveness. The programme aimed to reduce Namibia’s unemployment rate of 55%.
The Namibian government took note of the IMF’s concerns and remained confident that growth in the non-mining sector and the prospects for oil would provide the impetus for the growth needed to reach about 7% to address unemployment and poverty levels.
The IMF also took sympathetic note of Namibia’s reclassification as a middle-income country, which increased the cost of lending and is the result of a highly skewed national income distribution.
The IMF said that, under the International Comparison ProÂgramme, Namibia fared relatively poorly. It had a significantly lower per capita GDP than other middle-income countries in Africa, ranking with the likes of Cape Verde, Lesotho and Swaziland.
But Namibia was one of the most expensive countries in Africa to live and work in. Its standard of living, as measured by real actual consumption, was at the bottom of the list of middle-income countries and only marginally better than Cape Verde and Lesotho.
International reserves also declined from a peak of $1.9-billion at the end of 2009 to $1.4-billion at the end of last year, which was enough to cover imports for 2.4 months, or 72 days. The international benchmark was three months, but Namibia’s imports were financed mostly from foreign direct investment, the fund said.