Industries, mines and energy minister Modestus Amutse says the National Energy Fund remains stable despite spending N$1.3 billion in two months to cushion fuel prices.
“There is no crisis and we are not facing insolvency,” he said in an interview with Desert FM yesterday.
He said the government used the fund to cushion consumers against rising international fuel prices.
It paid fuel suppliers N$805 million in April and another N$490 million in May, leaving the fund with between N$200 million and N$300 million, Amutse said.
He said the fund remains stable and the government is confident that new measures will rebuild its reserves.
“The current position of the fuel supply and the mechanism that we want to transition into, which is the bulk fuel supply system, gives us confidence that everything will come back to normal,” he said.
The ministry introduced a temporary three-month fuel supply arrangement through global oil company Vitol while preparing to implement a coordinated bulk fuel import system.
Under the new model, fuel wholesalers will jointly procure fuel to reduce import costs and remove monthly import premiums, saving the government N$300 million monthly.
“That will stabilise the energy fund because N$300 million per month is the average we currently pay on those premiums, which we are removing,” he said.
Economist Tannan Groenewald says the energy fund is not yet in a position to absorb another major international oil price shock on its own.
Groenewald says the fund was designed to cushion motorists against normal fuel price fluctuations, not the sustained increases caused by recent geopolitical tensions.
Groenewald also warns that Namibia would struggle to keep cushioning fuel prices if another series of international oil price shocks occurred.
“One shock is manageable, although it comes at a cost.
“But repeated shocks would place significant pressure on a budget that is already facing a widening deficit, rising debt-service costs and volatile Southern African Customs Union revenue,” he says.
He says repeated fuel subsidies could force the government to redirect money from health, education and infrastructure or rely on more borrowing.
However, he says lower international oil prices are expected to help the fund recover after crude oil prices fell from about US$120 (N$1 964) a barrel to levels seen before the conflict.
“Those over-recoveries should not be passed on to consumers in full because the fund needs to rebuild its reserves for future shocks,” Groenewald says.
