Chart of the Week

The newly appointed minister of finance and social grants, Erica Shafudah, tabled the budget for Fiscal Year (FY) 2025/26, the first of the new administration. Pressures on the government’s revenue position due to increasing expenditures to address immediate priorities and steep impending debt redemptions resulted in some deterioration of Namibia’s key metrics. This was compounded by lower Gross Domestic Product (GDP) growth expected over the medium-term expenditure framework (MTEF). Despite this, the country’s fiscal position and outlook – as reflected in the budget tabled – remain somewhat stable.







The country’s total debt stock debt for FY 2024/25 stood at N$165.9 billion, or 66.0% of GDP. The government expects debt to decline to 62.0% of GDP in FY2025/26, supported by economic growth, a narrowing fiscal deficit, and targeted debt redemptions, particularly for the second Eurobond USD750.0 million) and IMF obligations (NAD3.5 billion).







The government has made a concerted effort to shift its debt profile towards domestic borrowing, with over 80% of the total debt stock expected to be denominated in local currency in FY 2025/26. The redemption strategy for the Eurobond includes reshoring NAD2.3 billion into domestic paper, which, along with the widened deficit and domestic redemptions, will drive up the domestic funding requirement significantly. While this has pricing implications, it is worth noting that domestic/foreign debt rebalance reduces the country’s exposure to exogenous risks and exchange rate volatility.







The overall deficit for FY 2024/25 reached 3.9% of GDP, higher than 3.2% estimated in the mid-term budget tabled in November 2024. This was due to lower nominal GDP and revenue shortfalls, particularly from SACU receipts and a subdued diamond sector. For FY2025/26, the deficit is projected at N$12.8 billion, or 4.6% of GDP. This indicates a looser fiscal policy, after years of fiscal consolidation. The Ministry has forecasted the deficit to average 4.0% of GDP over the medium term, but this is partially predicated by a rebound in diamond prices and a notable restraint on expenditure.







Interest payments for FY 2025/26 are budgeted at N$13.7 billion, representing 14.8% of total revenue and 4.9% of GDP. Debt servicing costs now exceed development expenditure, limiting resources available for growth-enhancing investment. While the debt servicing ratio is the country’s targeted 10% of revenue, it is expected to improve over the MTEF.