Macro Pulse: Namibia budget speech 2025/2026

The latest budget is, in many ways, an acid test for whether Namibia can break free from its recurring traps of commodity dependence, unsteady revenue streams, and sluggish growth in the real economy, Simonis Storm (SS) says in its assessment of the 2025/2026 budget. “On the surface, the 2025/26 fiscal framework promises moderate progress on deficit reduction and debt stabilisation, while continuing to invest in social protection and infrastructure. But a closer look, reading between the lines, raises important questions about whether the new administration’s policies can withstand the shifting headwinds of global trade, regional uncertainty, and the weight of domestic structural challenges,” SS said. According to SS, the medium-term economic assumptions are cautiously optimistic to start. “Growth is projected to accelerate from 3.7% in 2024 to 4.5% in 2025 and 4.7% in 2026, driven mainly by a rebound in mining—especially uranium and gold exploration—and a recovery in agriculture if rainfall improves. The diamond sector’s recent troubles illuminate just how precarious Namibia’s reliance on commodities can be,” SS said. “A slump in global demand for diamonds was a central factor in last year’s underperformance relative to 2023. Yet the budget banks on stronger overall mining receipts and a mild global recovery, despite the International Monetary Fund (IMF) projecting only 3.3% worldwide growth in 2025 and 2026,” it added. A balancing act SS noted that the drop in revenue from the Southern African Customs Union (SACU) is expected to have a significant impact on the government’s finances. “Which brings us to the revenue story. The budget sets total revenues at N$92.6 billion, about 1.9% above the revised 2024/25 estimate. The big swing factor is the N$6.9 billion drop in Southern African Customs Union (SACU) receipts, to just N$21.1 billion,” SS said. To make up for the shortfall, the government intends to gain additional revenue from taxable sources of income. “That cut would be devastating on its own had the government not become adept at finding other revenue sources in personal income tax, value-added tax (VAT), and non-mining corporate tax. The budget envisages notable gains: N$2.6 billion more in VAT, N$1.8 billion more from individuals, and N$1.3 billion more in non-mining corporate tax,” SS said. “In theory, those sums replace what is lost in SACU flows, but it assumes robust compliance, steady employment, and buoyant consumer spending. Although the Namibia Revenue Agency (NamRa) collected a commendable N$3 billion in the ongoing tax amnesty, it remains to be seen how sustainable that level of compliance is once the amnesty ends and businesses and individuals face renewed economic strains,” it added. Government’s growing spending While the government must contend with reduced income, spending continued to grow over the last fiscal year’s target by 4.9%, SS observed. “Meanwhile, total spending rises to N$106.3 billion, a 4.9% increase over last year’s revised figure. The biggest piece of nuance here is how quickly Namibia’s interest bill hasgrown: at N$13.7 billion, the government will spend more on servicing debt than on its entire development budget of N$12.8 billion,” SS said. Of equal concern is the growth in the government’s debt-servicing costs, which reduces its ability to fund development projects. “That means debt-service costs are absorbing a full 15% of all revenues—a ratio that reduces the fiscal space for everything from health and education to capital-intensive projects. In that sense, the debt stock, which the government aims to bring down to 62% of gross domestic product (GDP) from 66%, is forcing some hard trade-offs,” SS said. According to SS, the attempt to reduce the debt ratio hinges on a stable or improving GDP denominator as well as prudent redemption strategies for major external obligations.“On a positive note, the budget does not opt for sudden austerity that might derail the economic recovery or place an excessive burden on vulnerable groups. Education receivesover N$24 billion, indicating the government’s view that skill development is key to future competitiveness,” SS said. Sectorial allocationsHealth is allocated just over N$12 billion, including targeted funds to reduce overcrowding in hospitals and expand infrastructure. “Those are essential moves, given the unmet demand for quality healthcare and the reality that Namibia’s epidemiological challenges require better-equipped facilities. However, historically, large allocations have not always translated into swift on-the-ground improvements, due to bureaucratic blockages in project execution,” SS said. SS voices concern at the government’s ability to be able to fast-track its development projects. “Still, one must ask: Will these changes happen fast enough, and in a meaningful manner, to ensure that major capital projects are not stuck in extended tendering processes?[The ministry of] agriculture and water, allocated around N$3.6 billion combined, sit at the heart of the country’s ongoing struggle with drought and food insecurity,” it said. Another pressing matter for SS is youth unemployment, which remains one of the country’s most urgent challenges. The ministry of sport, youth, and national service has earmarked N$1.3 billion, with an emphasis on stadium construction, sports leagues, and youth skills programmes. While that is an improvement, the question arises whether it is enough to move the needle in a nation where more than one in three young people struggle to find formal work,” it said. SS noted that while the amount marked an improvement, in comparison to the government’s proposed spending on defence, it presents potential for tension in future. “Compare that with N$7.5 billion allocated to [the ministry of] defence, and the stark difference in resources becomes clear. Although a portion of the defence budget is presumably tied up in salaries and legacy obligations, the mismatch between defence and direct youth-focused spending is a lingering tension point,” SS said. “This is especially significant given that youth disaffection and lack of economic opportunity can be a long-term threat to stability, every bit as significant as the external threats that the defence budget is meant to counter,” it added. Also worth scrutiny to SS is the government’s approach to state-owned enterprises. “Meatco allocated N$100 million, has historically required ongoing bailouts, largely because of operational inefficiencies, structural cost factors, and limited export diversification,” SS said. “TransNamib, receiving N$320 million, has likewise struggled with ageing rolling stock and outdated infrastructure. While supporting these SOEs might preserve jobs and services, it risks perpetuating a cycle of recurring rescue packages if deeper restructuring is not pursued,” it added.

Macro Pulse: Namibia budget speech 2025/2026

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Macro Pulse: Namibia budget speech 2025/2026

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