Government urged to strengthen fiscal policy

The World Bank has recommended that the government improve its fiscal policy framework in anticipation of potential economic growth that may be brought about by the discovery of oil and gas in the Orange Basin.

The World Bank said that Namibia stood on the cusp of economic boom owing to the discovery of commercially viable oil by multi-nationals Shell and Total.

“Namibia is on the brink of an economic boom and structural transformation brought about by the discovery of oil and gas, and the potential to develop a green hydrogen value chain,” the World Bank said in a country partnership framework report.

According to the World Bank, while the oil and gas discoveries held the potential to double Namibia’s gross domestic product (GDP), it was necessary for Namibia to design policies to wean dependence off of these resources.

“These investments, which could surpass the country’s GDP, will substantially increase economic output and exports but will require sound macroeconomic and fiscal policies to prevent the emergence of imbalances and Dutch disease type effects, which could dent competitiveness and impede government’s diversification and job creation objectives,” the World Bank said.

“At the same time, additional fiscal revenues could help address key constraints to growth and shared prosperity by closing infrastructure, health, and educational gaps. These investments will be key to attain the government’s desired objectives of developing the private sector, boosting job creation and output, and export diversification,” it added.

To ensure Namibia reap the benefits of its newly potential oil and gas riches, it was necessary for Namibia to modernise tax administrative functions while also making improvements in the effectiveness of its public expenditure.

“Attaining these objectives will also require improvements in the efficiency and effectiveness of public expenditures by, inter alia, strengthening public procurement, modernising tax administration, reforming public enterprises, and leveraging digital technologies,” the World Bank said.

“Improving fiscal policy design and macro-fiscal management is pivotal to increase fiscal space to confront future shocks, expand the social safety net, finance needed infrastructure investment to improve external competitiveness, and strengthen climate resilience,” it added.