Namibia’s government (GG) debt rose to 67.2% of GDP by the end of 2024, surpassing the ‘BB’ median of 53.8%, Fitch Ratings has revealed in its latest assessment.
The international ratings agency affirmed Namibia’s long-term foreign currency issuer default rating at ‘BB-’ with a stable outlook, but warned that public finances remain under strain.
“We project that GG debt will stabilise at about 65% of GDP, but remain above ‘BB’ peers,” Fitch said in its review.
The agency expects the country’s fiscal deficit to widen to 5% of GDP in the 2025 financial year, exceeding the government’s budget target by 0.4 percentage points.
This follows a shortfall of 3.9% of GDP in FY2024, which was 0.7 percentage points above the budgeted figure.
“Fiscal pressures follow slippage in FY24, when the deficit reached 3.9% of GDP, 0.7pp higher than budgeted as expenditure growth outpaced revenue,” Fitch stated.
Revenue collection is facing mounting pressure, with diamond-related income dropping to below 1% of GDP in FY2024, compared to 2% in the previous year. Southern African Customs Union (SACU) receipts are projected to decline sharply by 24% in FY2025, falling to 8% of GDP from 12% in FY2024.
“Weaker traditional revenue drivers, the diamond sector and Southern African Customs Union (SACU) receipts, will put downward pressure on government revenue,” Fitch warned.
Overall, Fitch forecasts that general government revenue will fall to 33% of GDP in FY2025 and to 32% in FY2026.
Despite these pressures, the economy is expected to show modest improvement, with growth projected at 3.8% in 2025, up slightly from 3.7% in 2024.
Fitch attributes the expected recovery to better agricultural performance, a rebound in tourism, and stronger output in the gold and uranium sectors. However, activity in the oil and gas sector is likely to slow ahead of final investment decisions.
“We expect the medium-term growth prospects to be supported by sustained investments in the mining sector,” Fitch noted.
Interest payments on government debt are expected to absorb 15.6% of revenue in FY2025, significantly above the ‘BB’ median of 11.3%, and are projected to remain above the 2026 median of 10.7%. The agency also highlighted fiscal risks posed by state guarantees, which currently stand at around 4% of GDP.
“Public finances remain under pressure due to high social spending, interest payments, and rigid expenditure,” Fitch said.
Namibia’s gross borrowing needs are expected to peak at 32% of GDP in FY2025, largely due to the upcoming maturity of a US$750 million Eurobond. The government intends to redeem the bond using US$500 million from existing sinking funds and other financing sources.
“Financing flexibility is underpinned by a sizable NBFS (non-bank financial sector) with assets of 180% of GDP and asset allocation needs for a captive domestic investor base,” Fitch added.
Inflation is forecast to ease to 4.0% in 2025, down slightly from 4.2% in 2024. The Bank of Namibia has kept its policy rate unchanged at 6.75% following four rate cuts totalling 100 basis points since August 2024.
“We expect the BoN’s monetary policy to remain consistent with the sustainability of the long-standing peg arrangement of the Namibian dollar to the South African rand,” Fitch said.
