Economists have warned that Namibia may only be able to sustain its current fuel price relief measures for another six to 12 months, as rising subsidy costs place increasing pressure on public finances.
The warning comes after government moved to keep fuel prices unchanged in June despite a provisional petrol under-recovery of N$1.56 per litre.
To avoid passing the increase on to consumers, the Ministry of Industries, Mines and Energy absorbed an estimated N$47.2 million through the National Energy Fund.
However, Standard Bank Namibia Economist Helena Mboti cautioned that the current approach is becoming increasingly expensive and cannot be maintained indefinitely.
“The fiscal burden is already significant and requires financing through increased domestic borrowing, bond issuance or, as a last resort, external debt. Given these pressures, the current approach is only sustainable in the short term, roughly six to 12 months,” Mboti said.
According to estimates, government has already spent between N$847.2 million and N$1.3 billion cushioning consumers against higher fuel prices.
The intervention has shielded households and businesses from a series of global oil market shocks linked to geopolitical tensions in the Middle East and disruptions in international energy supply chains.
High Economic Intelligence Economist Lewis Komu said the policy remains appropriate as a temporary response to exceptional market conditions but warned against turning it into a permanent subsidy programme.
“Government can sustain the intervention as long as it remains a temporary cushioning measure rather than a permanent subsidy,” he said.
The latest fuel price decision highlights the difficult balancing act facing policymakers, who must protect consumers from inflation while safeguarding fiscal sustainability.
Industry analysts say a full pass-through of fuel costs could have accelerated inflation and increased transport and production costs across the economy.
At the same time, continued intervention is steadily eroding the National Energy Fund’s financial reserves.
Minister of Industries, Mines and Energy Modestus Amutse recently acknowledged that the fund’s surplus has been “almost exhausted” after months of absorbing under-recoveries and additional import costs.
Government is now pursuing structural reforms aimed at lowering fuel procurement costs, including the introduction of a bulk petroleum import coordination system.
The new framework is expected to consolidate fuel purchases, improve bargaining power and reduce premiums charged above the Basic Fuel Price.
The regulations are targeted for implementation by the end of September 2026.
