The International Monetary Fund (IMF) says the country is battling to identify policies and reforms that can spur the domestic economy.
“The authorities’ consolidation plans strike a right balance between stabilizing public debt and supporting the economy, but several actions are needed to deliver this outcome. Immediate measures should be taken to contain the FY19/20 fiscal deficit within the budget limits as spending pressures are rising. Policies to deliver the fiscal adjustment planned for the next two years also need to be fully identified,” Geremia Palomba, IMF Mission Chief for Namibia said in his report after the Bretton woods institutes Article IV Consultation with Namibia.
“Policies should focus on rationalizing large spending items, particularly wage costs and transfers to public entities. Moreover, they should combine expenditure and revenue measures that support long-term growth, while protecting and improving social assistance programs.”
The IMF in its finds said rationalizing public entities, strengthening revenue administration, and improving budget and expenditures controls is critical to delivering adjustment plans for the country.
“Avoiding excessive risk-taking from off-budget operations will strengthen the credibility of the adjustment and reduce fiscal risk. The mission welcomes the authorities’ intention to develop restructuring plans for key loss-making public enterprises,” Palomba said.
“Undertaking reforms to strengthen productivity and competitiveness is a must to lift business confidence and the long-term growth potential of the economy. In parallel with fiscal adjustment policies, special emphasis should be placed on reducing policy uncertainty, streamlining business regulations, removing obstacles that contribute to high electricity and transportation costs (including reforming public enterprises operating in these sectors), and establishing a well-structured wage policy for the public sector to better align wage dynamics and productivity. Over time, it is important to remove obstacles to exports, address the shortage of well-educated and skilled workers, and foster the adoption of new technologies.”
First Capital Economist, Milner Siboleka warned that without strong structural reforms, the country could fail to recover this year from its longest recession, with the IMF forecasting the domestic economy to remain mildly negative in 2019, with growth expected to turn positive in 2020 and gradually converge to a long-term rate of about three percent.
“While we welcome the tough fiscal consolidation stance for long-term macroeconomic stability, it will require that we compliment such efforts with major structural reforms. Unless we convince the private sector to invest, the economy will continue to struggle. It is time that we enhance enablers for the SME sector to grow. Equally, we need to do more to be a preferred destination for foreign investment. As expected, recent efforts by government to attract investment could take months, if not years before we see results. It is too soon to expect results from the structural reforms government has taken since last year,” he said.
Ngoni Bopoto, a strategist at BroadSide Capital, said “the IMF mission's statement certainly displays reasonable insight with respect to affairs of the fiscus. We have been advocating the introduction of non-debt private capital to balance the mentioned adjustments and remain of that view. It is however necessary to exercise diligence in negotiating such contracts in order to ensure sustainability.”
Economist Mally Likukela forecast that the country’s economic recession will persist.
“There is no more truth than what the IMF has said in their report. Government at the moment has no ability to stimulate the economy as it now lacks the fiscal space. I agree that the policies that government has put in place are not enough to turn around economy. The private sector also has no balance sheet to sustain the growth. I expect the recession to persist and expect it to last for a year and half, after which we can expect to see tangible signs,” he said.
Frederico Links, a Governance Researcher at the Institute for Public Policy Research (IPPR) called for more transparency and accountability from government about the seriousness of the economic situation in the country.
“I think it's been clear to anyone with a level head that government's growth pronouncements over the last two years have been overblown and unsubstantiated by evidence. This has been pointed out by economists every time Calle Schlettwein or the President – if you look at the last two budget statements and the last two SONAs – have announced that 'green shoots' are starting to show.
Of course, no government is going to say straight out, especially not on the eve of elections, that the situation is bad and getting steadily worse, but you'd still expect some sort of moderation in sentiment, especially when shortly after each of these positive predictions are made, economic data is released that paints a very different picture,” he said.
“It worryingly shows that senior politicians are making unsubstantiated rhetorical claims which amount to misinforming the public at a time when people need to be told what will be done to arrest the damaging economic deterioration. I believe there needs to be a whole lot more transparency and accountability about the seriousness of the economic situation in this country. This is an election year, so, we'll probably continue to hear a playing down of the bad news and a doubling down on the message that there will be positive growth this year and next,” opined Links.