IMF calls for public wage reform – again

Accelerating public wage reform and the reform of state-owned enterprises (SOEs) is vital for the health of the Namibian economy, the International Monetary Fund (IMF) has said.

This include introducing early retirement, the IMF said following its annual Article IV Consultation with Namibia, which ended on Monday.

“Implementing the authorities’ fiscal consolidation strategy is pivotal to preserve debt sustainability and protect against the volatility of Sacu [Southern African Customs Union] revenues, which represent a significant contribution to the budget,” the IMF said in a statement.

The fiscal deficit has narrowed considerably, from 8.6% in 2021/22 to 5.3% in 2022/23, as pandemic-related spending pressures eased, and measures were taken to contain the public wage bill growth and improve the performance of state-owned enterprises, the IMF noted.

“Nevertheless, public debt continued to rise and reached 68.7% of GDP [gross domestic product] with the associated interest costs attaining 4.5% of GDP. Meanwhile, social assistance was expanded to address food insecurity,” the Fund added.



Inflation

Inflation, which rose sharply in 2022 due to high international oil and food prices, has eased in recent months, reflecting the global trend.

“Food price inflation has remained elevated, susceptible to resurging fuel and transport costs and the impact of the drought as well as climate change more broadly,” the IMF cautioned.

To respond to inflationary pressures, the Bank of Namibia (BoN) has tightened its policy stance following the South African Reserve Bank (SARB).

“Keeping the policy rate aligned with the SARB and maintaining an adequate level of reserves will support the currency peg and anchor inflation. Enhanced macroprudential oversight will help strengthen the resilience of the financial sector and support financial stability,” according to the IMF.



Growth

For 2024 and the medium-term, Namibia’s growth path is expected to stabilise at just below 3%, according to the Fund.

“New mineral discoveries and the investment in green energy provide an opportunity to boost growth, employment and foster diversification.

“Strengthening the public-private partnership framework and addressing constraints hampering entrepreneurship, including the regulatory burden, skill mismatches, input costs, especially energy and water, and governance challenges would help the Namibian economy benefit from the investments in these emerging sectors,” the IMF said.