Namibia is facing mounting fiscal pressure as debt linked to state-owned enterprises has risen to around 4% of gross domestic product, according to the latest assessment by Fitch Ratings.
The agency said state-owned enterprises continue to pose a financial risk to government finances, with many entities still reliant on public support while undertaking major infrastructure projects in road construction, housing and power generation.
Fitch said these contingent liabilities are adding to Namibia’s already rising debt burden, which is projected to increase to 66% of GDP in the 2026/27 financial year, above the average for countries with a similar BB credit rating.
“We expect GG debt/GDP to rise by 1pp to 66% in FY26, amid a continued primary deficit, above the ‘BB’ median of 54%. Contingent liabilities are expected to stem from government-guaranteed debt of SOEs, amounting to 4.0% of GDP, reflecting increased budget support for key SOEs undertaking development projects in road construction, housing and power generation,” the report said.
The ratings agency also warned that the cost of servicing government debt is increasing sharply. Interest payments are expected to consume 18% of state revenue this year, compared to an average of 11% among countries in the same ratings category.
This means a growing share of government revenue will be directed towards debt repayments, leaving less funding available for public services and development projects.
Despite the concerns, Fitch maintained Namibia’s BB- sovereign credit rating with a stable outlook.
The agency said the rating continues to be supported by Namibia’s relatively strong institutions, governance systems and access to domestic funding through pension funds and the broader non-bank financial sector.
“Namibia’s ratings are supported by its strong governance indicators and institutional framework relative to rating peers, and by fiscal financing flexibility underpinned by a large non-bank financial sector, with assets amounting to about 182% of GDP at end-2025,” it said.
Fitch expects Namibia’s economic growth to remain subdued in the short term, forecasting expansion of 1.6% in 2026 following estimated growth of 1.7% in 2025.
The slowdown is linked to weaker global diamond demand, lower gold production and the broader economic effects of the ongoing conflict involving Iran, which has pushed up fuel costs and weighed on domestic demand.
However, the agency said stronger uranium production, ongoing construction activity and a recovery in livestock production following the 2024 drought are expected to support the economy.
“Strong uranium production, alongside continued construction activity and a recovery in livestock production following the 2024 drought, underpin growth, which we forecast to pick up to 3.2% in 2027,” the assessment said.
Fitch also said Namibia’s budget deficit is expected to remain elevated, although it is projected to narrow slightly to 6.2% of GDP in the current financial year. This remains above government targets and significantly higher than the average for similarly rated countries.
According to the agency, government expenditure continues to face pressure from a rigid spending structure, rising debt servicing costs, fuel subsidies and ongoing financial support for state-owned enterprises.
Fitch added that the public sector wage bill and interest payments together account for more than half of government revenue, limiting fiscal flexibility.
Revenue collection is also expected to weaken, largely due to lower diamond-related income. Although government has introduced tax reforms, including a 10% dividend tax, Fitch said the gains are likely to remain limited.
At the same time, lower corporate tax rates for non-mining businesses are expected to support investment but reduce state revenue in the short term.
“Fitch expects GG revenue-to-GDP to decline by 1.7pp to 30.1% in FY26, driven by lower diamond-related revenue and limited gains from tax reforms. The recent reduction in the non-mining corporate tax rate, to 28% from 30%, should support investment, with anticipated revenue losses partly offset by measures such as the recent introduction of a 10% dividend tax,” the report said.
Fitch further noted that debt refinancing risks have eased after Namibia repaid its US$750 million eurobond in October 2025.
The repayment reduced external debt obligations and lowered government borrowing requirements, while domestic investors, including pension funds and banks, continue to provide a reliable source of funding for the state.
