Namibia’s reclassification: A new economic reality

Finance ministry says country has always been unequal

Namibia’s reclassification from an upper-middle income to a lower-middle income country is not a downgrade but rather a long overdue adjustment.

This is because the country faces one of the largest income inequalities, second only to South Africa in southern Africa.

Namibia’s Gini coefficient, which typically falls between 0 and 1 (where 0 represents perfect equality and 1 represents perfect inequality), is around 0.59.

Executive director in the ministry of finance, Michael Humavindu, says the reclassification is a move in the right direction.

“It is not a downgrade, it is a reclassification based on the arguments we have been putting forward.

“But it must still continue because the actual parameter that we want, the Gini coefficient, is not yet being used. We have not yet won the battle.

“They made the adjustments, what we have been fighting for as middle income countries, but they didn’t use the Gini coefficient yet, they only used other things like economic growth and inflation and other types of economic parameters. But the main one, the per capita gross domestic product (GDP), must be adjusted with a Gini coefficient, which is the measure of income inequality,” says Humavindu.

The executive director explains that Namibia has been misclassified as an upper-middle-income country due to the per capita criteria used to assess the population’s earning capabilities. This is because per capita income is an average, and most of the country’s population earns significantly less than the threshold, unable to afford even basic necessities like housing.

“And therefore, we have been fighting as a country, plus other middle income countries that have also been wrongly classified, to say, no, you must adjust that thing to reflect our economic realities. You can’t have so many people at the bottom earning so little. They are not even able to afford a shelter, proper food, proper medicine, and are not able to stay in areas where they are having convenient access to infrastructure,” he adds.

Classifications of countries by the World Bank determines the rate at which countries can get loans and donors.

Namibia was, therefore, subjected to non-concessional lending, meaning borrowing was more expensive.

“We were subjected to what is called-non concessional lending, meaning that if we had to borrow, we had to pay higher interest rates as we were unfortunately perceived as a rich nation,” says Humavindu.

He says a country where the majority of the population are not able to afford shelter, proper food, proper medicine and to stay in areas with proper infrastructure, should not be categorised as rich.

Humavindu adds that the ‘rich’ status also disadvantaged Namibia from getting donors and grants.

“Because they (donors) used to say, Namibia is an upper middle income country, you don’t need our help, we’ll go to the others that are lower and less developed,” says Humavindu.

According to the World Bank’s 1 July 2025 to 30 June 2026 Fiscal report, Namibia is the only country globally to have moved down an income group in this year’s review.

“Namibia was the only country whose classification moved downward this year, from the ‘upper-middle income’ to the ‘lower-middle income’ category,” reads the report.

The reclassification follows a slowdown in economic growth.

The World Bank reported that Namibia’s GDP grew by 3.7% in 2024, down from 4.4% in 2023, with a decrease in the mining and quarrying sector as a major factor.

Growth in the sector dropped from 19.3% in 2023 to a decline of 1.2% in 2024.

This was mainly due to a global decline in the demand for diamonds.

Inflation, measured by the GDP deflator, also slowed significantly – from 6.6% in 2023 to 3.3% in 2024, the World Bank notes.

In 2023, former president Hage Geingob told the United Nations General Assembly in New York that Namibia continues to be “unfairly” classified as an upper middle-income country because of its high per-capita income.

He said taking the small population of Namibia, divided by its GDP, and arriving at a high per capita income is not a good measurement.

“It does not reflect the reality of the past colonial injustices in Namibia where the white minority oppressed the black majority,” Geingob said.

Popular Democratic Movement treasurer general Nico Schmidt warns that the reclassification could lead to unsustainable borrowing.

This will be bad for Namibia which is already facing a high level of debt.

“It might turn into a spending spree like we have seen in the past,” says Schmidt.

He adds that the only way he sees the move being beneficial is if the money borrowed is used wisely.

“If we are responsible and we borrow money responsibly and we spend money responsibly, then it could be beneficial,” he says.

He cautions that easy access to concessional loans could lead to the country spiraling into unmanageable debt.

“We find ourselves in a situation where the country is actually, for all practical reasons, bankrupt. We will be tempted to borrow more money, but we will pay a price on it,” says Schmidt.

He recommends that the government be more strict with expenditure and borrowing, and use the money where it is necessary.

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