Economist warns of oil effect on fiscal policy

Economist Robin Sherbourne warns that Namibia’s financial policy is at a crossroads with potential oil revenues looming over the government’s finances.

He made these remarks on Tuesday while presenting his new report on economic scenarios leading up to 2030, organised by the Institute for Public Policy Research.

“Oil makes a difference to everything,” he said.

Sherbourne said financial policy is divided into a pre- and post-final investment decision (FID) period.

Currently, Namibia is in the pre-FID period. He said the tabling of the budget this week will show whether the minister of finance is able to keep to her commitment of maintaining a primary budget surplus and cap public spending.

But if TotalEnergies makes a final investment decision to go ahead with its Venus project this year, it will affect investors’ perception of Namibia’s credit-worthiness, said Sherbourne.

TotalEnergies’ proposed investment in its Venus project is significantly greater than Namibia’s gross domestic product.

The country will then be in a position where it can borrow against its expected future oil revenues, despite the fact that actual revenues will only accrue to the government in the mid-2030s, at the earliest.

He framed the choice as being between a massive increase in public spending and a sustainable fiscal policy that would support long-term, economy-wide growth.

“What happened to the sovereign wealth fund? The consolidation of power, lack of explanation to the public. . . alarm bells are ringing,” he said.

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