Namibia’s cash crunch: government spending exceeds revenue, experts warn of rising debt risks

The government is spending faster than it is generating revenue, raising concerns that Namibia could run out of cash to meet its financial obligations and be forced to borrow more to sustain public services.

This is contained in a report by Cirrus Capital analyst Pandu Shaduka, suggesting that the government overstated its wealth position for the 2025/26 financial year.

This is because for much of the 2025/26 fiscal year, government bank statements appeared healthy but only because it included the cash sitting in the sinking fund, which is a savings account that a country puts money into for specific anticipated expenses.

Economists say that if government cashflow continues to decline, cuts to social spending could leave many vulnerable people without basic needs, such as medicine.

After the Eurobond redemption, the Bank of Namibia’s November balance sheet shows that government liabilities moved from a positive balance of N$4 billion in September to a negative balance of N$3 billion as at the end of November.

“Following the Eurobond’s redemption, it became clear that a material portion of the government’s cash on hand was the sinking fund balance. The government has not been generating anywhere near enough revenue to satiate its current spending commitments,” Cirrus says. “Throughout the year, the government’s cash position had been reflected as robust, due to a change in the treatment of the sinking fund balance on the central bank’s balance sheet.

The sinking fund was set up to pay off a N$13-billion Eurobond debt, which was due in late October.

Additionally, more cash constraints came from the accumulation of value-added tax refunds amounting to N$800 million by the mid-year.

“In our view, the cash stress is not episodic. Without a material improvement in revenue performance, the government is likely to increase reliance on short-term domestic funds,”

Economic Association of Namibia vice president and member of the presidential task force on economic recovery Jesaya Hano-Oshike agrees that the country fiscus is under pressure, but says it is manageable.

He says past events have proven that the government is capable of stabilising public finances through tighter expenditure control and improved debt management, while continuing to meet core social obligations.

“Going forward, a continued focus on prioritising essential services will be critical to ensuring prudent stewardship of limited fiscal resources,” Hano-Oshike says.

Economist Abraham Eita says the country is not in an immediate crisis, but the current financial path leaves little room for error.

He says due to a narrow tax base, slow growth and the rising social demands, the government’s decisions need to be thoroughly considered.

“If the growth remains weak, we do not only risk a sudden collapse, but also gradual fiscal stress where the government will struggle to expand or even maintain social programmes without increasing debt,” Eita says.

He says the steps to be taken should not just look at cutting spending, but rather how spending is allocated and how effective it is.

He adds that if the government has to borrow, it should not be for social spending, but for revenue generation ventures.

“Borrowing should be reserved mainly for projects that clearly raise future growth and revenue, not for recurrent consumption,” Eita says.

Economist Omo Kakujaha-Matundu says the government is liquid, however, the analysis shows that it is not collecting enough tax revenue, which could result in delayed payments to creditors.

This could potentially lead to the government taking a third Eurobond to meet financing needs if revenue collection does not increase.

He adds that the only other option would be to cut social spending, however, this would harm not only low-income groups but the entire economy.

“The most immediate solution will be to reduce spending on services provided to the poor. An obvious example is the no-stock of drugs/services at public hospitals/clinics. That’s already happening,” Kakujaha-Matundu says.

He agrees that redeeming the Eurobond drained fiscal resources, although it reduced government debt, it has left the country with few options to sustain itself.

“My fear is that since the government borrowed locally to redeem the Eurobond, it could consider external sources of funding. Either the International Monetary Fund or other lenders or go for a third Eurobond,” Kakujaha-Matundu says.

Last year in an interview with CNBC Africa after redeeming the Eurobond, minister of finance Ericah Shafudah said the country’s funding is now structured as 85% domestic and 15% external, with 90% of foreign debt denominated in South Africa’s rand currency.

At the time, Shafudah said the government had no plan of issuing another one.

“When the time comes, we will tell you. But for now, we don’t have that one in our plan,” she said.

The Eurobond repayment was predominantly financed domestically, with N$7.5 billion from the sinking fund and N$5.1 billion raised from local lenders, including Standard Bank Namibia, First National Bank Namibia, and Bank Windhoek in partnership with Absa.

Over the last four years Namibia has collected N$275 billion in tax revenue.

Namibia Revenue Agency (Namra) collected N$61 billion by 31 December 2025 towards its N$89-billion revenue target for the 2025/26 financial year, according to data released by the agency.

Namra says domestic taxes accounted for N$41.63 billion of the total, while customs and excise contributed N$19 billion, underscoring the continued reliance on internal revenue sources to support the national fiscus.

By comparison, cumulative revenue collections for the 2023/24 financial year stood at N$76.52 billion by March 2024, comprising N$48.72 billion from domestic taxes and N$27.80 billion from customs and excise.

Affirmative Repositioning parliamentarian George Kambala warns that Namibia’s rising public debt has become structural, with government spending continuing to exceed revenue.

Kambala says the country’s growing debt burden is increasingly financing consumption rather than productive economic activity, limiting job creation and export growth.

“We need to shift from managing shortages to building a productive economy so revenue can sustainably catch up with expenditure.

“Low cashflow leads to delayed payments, stalled projects, and pressure on domestic borrowing hurting small and medium enterprises and the broader economy,” he says.

Kambala adds that programmes like subsidised education and the National Youth Fund are not the problem in principle.

“Investing in youth is fiscally smart for a young country like Namibia. The issue is design and outcomes. If education produces unemployed graduates, or youth funds are disbursed without accountability and market access, they become costs instead of investments.

“These programmes must be restructured to support productive skills, real enterprises, and value chains so they expand the tax base and strengthen fiscal sustainability,” he says.

Namibia Economic Freedom Fighters deputy leader Kalimbo Iipumbu describes the country’s fiscal position as unsustainable, saying the latest fiscal and debt report reflects the financial strain experienced by many Namibians.

“Government expenditure persistently exceeding revenue reflects a structural problem, not a temporary shock. It points to weak revenue mobilisation, limited economic growth, and a continued dependence on borrowing to finance basic state functions,” he says.

Iipumbu warns that low cashflow has serious implications on the government’s ability to meet spending commitments, resulting in delayed payments to service providers, pressure on public sector wages and the postponement of development projects.

He says this weakens economic activity and reduces confidence in the state’s planning and credibility.

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