IMF says only 2% growth for Namibia in 2009

NAMIBIA can only expect an economic growth rate of 2 per cent this year, compared to an average of around 4 per cent over the past few years, the International Monetary Fund (IMF) says.

An IMF mission, headed by Wipada Soonthornsima, visited Windhoek last month to conduct annual consultations.
‘The discussions with the Namibian authorities took place against the backdrop of the global financial crisis and economic slowdown with important repercussions also for Namibia. After several years of solid economic growth, real growth in Namibia is expected to moderate to about 3 per cent in 2008 and to some 2 percent in 2009,’ the IMF officials said in a statement issued just before Christmas.
However, the large decline in world fuel prices in recent months should help to moderate inflation in Namibia this year to single digits, notwithstanding the impact on import prices of the marked depreciation of the Namibian dollar.
Inflation stood at 12 per cent at the end of last year.
‘The macroeconomic outlook for Namibia faces significant risks. A more pronounced global downturn could further weaken export demand, with adverse implications also for fiscal revenues,’ the IMF said.
A protracted global liquidity shortage could pose a threat to investment projects that are expected to be key drivers of medium-term output growth.
‘Against this background, a counter-cyclical fiscal stance is appropriate in the fiscal year 2008-09 (ending March 31), and sound fiscal management in recent years provides scope for some fiscal easing to allow for increased outlays in priority areas such as rural infrastructure, education, and poverty reduction.
‘However, the magnitude of the easing implied by the 2008-09 budget – the fiscal balance would swing by some 6,5 percentage points of GDP – seems considerably larger, even given counter-cyclical considerations. The projected large increase in expenditures raises concerns about the ability to ensure high quality of spending.’
The IMF mission shared the view of the Namibian government that further development of the domestic financial sector would facilitate broad-based economic growth, but is concerned that the new (State) pension fund and insurance company regulations would be difficult to implement and would risk distorting capital flows at the expense of lower returns and higher risk to domestic savings.
The experts recommended that consideration could be given to a greater focus on market-based alternatives to financial market development, including a broadening of the range of available domestic assets.
‘It is important to preserve the stability of the financial sector and the mission welcomes the Bank of Namibia’s prompt steps to curb and control non-licensed deposit taking operations and pyramid schemes.
‘The third National Development Plan provides a helpful framework to achieve high sustainable growth, and to reduce poverty and inequality. Continued improvement in labour productivity and private sector competitiveness will be critical in order to facilitate economic diversification and lower the high unemployment rate.
The IMF team held meetings with Prime Minister Nahas Angula, Minister of Finance Saara Kuugongelwa-Amadhila, Bank of Namibia Governor Thomas Alweendo, senior government officials, Members of Parliament, the private sector, labour unions and the academic and donor communities.
In an earlier report on Namibia’s fiscal transparency dated June last year, the IMF made it clear that the Finance Ministry ‘urgently needs to improve the consistency of reporting on the budget to facilitate informed discussion of policies and the rationalisation’ of Government spending.
The Ministry should make publicly available its quarterly information bulletin and should present a mid-year budget review to Parliament, it recommended.
The fiscal data should cover general government, and there should be improved reporting on State-owned enterprises.
‘Civil society should be involved more actively in the budget process and the budget calendar advanced so that the budget is presented to Parliament well in advance of the end of the fiscal year,’ the IMF recommended.
Government also needed to significantly raise the capacity for external and internal audit of its own activities and the tax administration’s ability to audit taxpayers.
‘It must firmly address proven instances of wrongdoing and ensure a proper structure is put in place for Government procurement and supervision of State-owned enterprises, and public banks, as well as subsidised enterprises.’