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Namibia enjoys steady growth, but needs to tackle HIV/AIDS, poverty

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
April 2005
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Namibia’s macroeconomic performance has been strong in recent years with rising GDP growth, declining inflation, and a strengthening external current account surplus, the IMF said in its annual economic assessment. Nevertheless, Namibia’s per capita income growth has lagged behind regional growth and has not generated sustained poverty reduction. Unemployment continues to exceed 30 percent and more than one-fifth of the population is infected with HIV/AIDS. The IMF Executive Board urged the authorities to continue implementing their strategy to combat the HIV/AIDS pandemic and broad-ranging structural reforms to promote private sector activity, generate employment, and address income inequality.

The fiscal deficit widened sharply recently, reflecting tax administration problems, a collapse in mining taxes, and a higher wage bill. However, the deficit is projected to fall in 2004/05 as tax administration problems are being addressed, customs union receipts are experiencing a one-time windfall, and nonpriority spending is being curtailed. The Board welcomed the authorities’ intention to bring the public debt ratio close to their fiscal rule target of 25 percent of GDP over the medium term. To rein in nonessential expenditure, firm action will be required to reduce the wage bill and support for public enterprises, which together account for nearly half of total spending.

Namibia’s external current account surplus widened further in 2004, partly reflecting an increase of exports to the rand area. The Board said the Namibian dollar’s peg to the South African rand has served the country well, but, given the potential for further rand appreciation, it underscored the need to improve the productivity and flexibility of the economy. More developed domestic financial markets should provide better investment opportunities for the rapidly growing pension funds and insurance companies, and help contain capital outflows. Namibia’s banking system is strengthening, but the Board urged careful monitoring of the surge in consumer lending.

Namibia20002001200220032004

Estimates
(percent change)
Real GDP3.52.42.53.74.2
CPI (end-of-period)10.88.313.62.05.0
(percent of GDP)
Overall fiscal deficit1-1.4-4.5-3.5-7.8-2.0
Public debt123.126.225.030.930.1

Figures are for fiscal year, which begins April 1.

Data: IMF staff report, January 2005.

Figures are for fiscal year, which begins April 1.

Data: IMF staff report, January 2005.

For more information, refer to Public Information Notices No. 05/39 (Cyprus), No. 05/33 (Malaysia), and No. 05/29 (Namibia) on the IMF’s website (www.imf.org).

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