Namibia’s public debt is set to surge to N$153.8 billion in the 2023-2024 financial year, an official has revealed.
Finance and Public Enterprises Minister Iipumbu Shiimbi said the surge is equivalent to 66% of GDP, a slight improvement from 67.9% in the previous financial year.
This comes as total debt stock stood at N$142.7 billion, equivalent to 67.9% of GDP.
“In nominal terms, debt grew by 13.5%, outpacing the growth in nominal GDP which is recorded at 11.1% over the same period. To achieve long-term debt sustainability, it is necessary for the fiscal policy stance to be such that the nominal growth in debt is lower than the growth in nominal GDP,” Shiimi said while tabling the midterm budget review on Tuesday.
Over the MTEF, he added that the pace of debt accumulation is estimated to have peaked resulting in a stabilisation of the debt ratios over the remainder of the MTEF, as nominal GDP growth outpaced debt growth.
“It is opportune to continue capitalising on the growth momentum to move the debt metrics in the desired direction. The medium-term fiscal framework will aim to implement further measures to contain the cost of living pressures while maintaining fiscal sustainability through managing the pace of debt accumulation,” he said.
Meanwhile, at the half-year mark, the total debt stock stood at N$149.3 billion, equivalent to 64.1% of GDP.
The Minister noted that commensurate with the rising debt portfolio coupled with the prevailing tight financial conditions, the public debt servicing bill has increased beyond the levels anticipated in the main budget.
In this regard, interest payments are revised upwards by N$1.7 billion to N$11.8 billion in FY 2023/24, equivalent to 15% of projected revenues for the year.
“The sharp increase in interest costs reflect unanticipated sharp movement in money market rates relative to the increase in the benchmark rates,” he explained.
Shiimi noted that debt servicing costs continue to absorb an increasing portion of the resource envelope, now exceeding expenditure on key social services such as Health and Social Protection.
“As a developmental state, it is important to always prioritise economic and social development objectives in the design of the fiscal policy. The degree to which debt servicing is increasingly crowding out such key developmental objectives adds further impetus to the call to prioritise stabilising the pace of debt accumulation, going forward,” he said.
According to the Bank of Namibia, total central government debt surged by 11.4% on a yearly basis, to N$145.6 billion at the close of June 2023.
The significant increase in debt was attributed to rising domestic and external debt, based on the Bank’s Quarterly Bulletin for September 2023.
As a percentage of the Gross Domestic Product (GDP), the total debt then stood at 64.2%, marking a 1.8% annual decline during the review period.
The Bank anticipates a moderate decline in the total debt stock to 65.7% of GDP by the end of the fiscal year 2023/24 based on expectations of primary surpluses in the budget and a faster increase in nominal GDP compared to the growth in debt.
Furthermore, the bank estimates that total debt will continue to decrease, reaching 60.6% of GDP by the end of 2025/26.
