Namibia’s fiscal outlook is facing increasing pressure as weakening revenue performance, rising debt levels and higher interest costs constrain government’s budget space, according to First National Bank of Namibia’s (FNB) analysis of the 2026/27 national budget.
Revenue collections have begun to soften, with total revenue for the 2025/26 financial year revised downward to N$87.4 billion. This is below the initial projection of N$89.4 billion and also lower than the N$89.1 billion collected in the previous year.
While revenue is expected to increase slightly to N$89.8 billion in 2026/27, the projected growth is largely attributed to higher receipts from the Southern African Customs Union (SACU), rather than stronger domestic revenue performance.
The report notes that several key revenue streams remain under pressure. Collections from diamonds, value-added tax (VAT), personal income tax (PIT) and gold have weakened. Gold revenue has been particularly affected as mining operations transition from open-pit to underground production, resulting in reduced output.
“The 2026/27 national budget outlines a fiscal path that remains functional but increasingly exposed to underlying structural weaknesses. Revenue performance continues to soften, with FY2025/26 collections revised downward to N$87.4 billion, below both the initial projection of N$89.4 billion and the N$89.1 billion collected in the previous year. The projected increase to N$89.8 billion in FY2026/27 relies mainly on higher SACU receipts rather than broad-based domestic revenue strength,” the report states.
“Key revenue categories remain under pressure, including diamonds, VAT, PIT and gold receipts, with the latter affected by lower production as mining shifts towards underground operations.”
At the same time, government expenditure remains relatively rigid. The civil service wage bill and the continued implementation of free education are limiting the state’s ability to adjust spending. Meanwhile, interest payments on public debt are rising rapidly.
Treasury expects interest costs to reach N$16.2 billion in 2026/27, which would absorb about 18.1% of total revenue and further reduce fiscal space available for social and development programmes.
Macroeconomic conditions are also adding to the risks.
“Macroeconomic conditions reinforce this fragility. Treasury forecasts real GDP growth of 2.9% in 2025, but actual performance for the first three quarters averaged 1.99%, indicating weaker momentum. The 3.1% growth projected for 2026 also exceeds what current trends imply,” the report notes.
“This mismatch between assumptions and observed data heightens the risk that revenue collections will fall short and that fiscal ratios will deteriorate further.”
Debt sustainability is also emerging as a concern. Although the debt-to-GDP ratio appears to improve temporarily in 2025/26, the improvement is partly attributed to higher nominal GDP assumptions.
Current economic data suggests that nominal GDP is tracking below the fiscal baseline, implying that the actual debt ratio may be higher than projected and could exceed 70% of GDP if economic growth continues to underperform.
Government debt is expected to rise to N$193.4 billion in 2026/27. While authorities anticipate stabilising the debt ratio at around 67% of GDP, this outlook depends on economic growth assumptions that may prove optimistic under current conditions.
Financing pressures are also intensifying. Government’s gross borrowing requirement is projected to increase from N$12.5 billion in 2025/26 to N$19.1 billion in 2026/27. Nearly 90% of this requirement is expected to be financed domestically, a development that could tighten liquidity within the financial system.
“While Namibia’s fiscal position remains manageable in the short term, rising interest costs, slowing revenue growth, dependence on domestic borrowing and optimistic macroeconomic assumptions point to a narrowing fiscal buffer,” the report states.
“Over the medium term, fiscal sustainability will depend on more credible growth projections, disciplined expenditure management and targeted efforts to broaden and stabilise the revenue base. Without these adjustments, the budget will remain vulnerable to modest economic or financial shocks, and government’s ability to maintain stability will weaken over time.”
