The Bank of Namibia (BoN) has projected that Namibia’s real Gross Domestic Product (GDP) will slow down to 3% in 2023 from 4.6% in 2022 as a result of slower growth in the primary and secondary industries. This is marginally more optimistic than the International Monetary Fund’s 2.8% forecast in its April 2023 World Economic Outlook.
Namibian consumers have been hit hard by inflation which averaged 6.1% in 2022, compared to 3.6% in 2021. The annual inflation rate rose to 7.2% in February 2023, the highest level since 2018, and remained at 7.2% in March 2023. It then decreased to 6.3% in May 2023, which is 1% higher than in May 2022. The BoN has projected an average inflation rate of 6.1% for 2023. The inflation rate surge was driven by increases in the prices of transport, food and non-alcoholic beverages.
Namibian consumers were dealt a further blow when the BoN increased the repo rate several times from 3.75% in December 2021 to 6.75% in December 2022. At the first meeting of the Monetary Policy Committee in February 2023, the BoN increased the repo rate by a further 25 basis points, followed by another increase of 25 basis points in April and 50 basis points in June to push the repo rate up to 7.75% and the prime lending rate to 11.5%.
The bank said the decision was appropriate “to safeguard the one-on-one link between the Namibian dollar and the South African rand” and that it is “simultaneously aimed at further containing inflationary pressure, stemming their associated second-round effects and anchoring inflation expectations.”
The higher repo rate of 8.25% in South Africa (as of May 2023) has partly led to a capital outflow of N$10.1 billion from Namibia to South Africa between January and May 2023 as asset managers seek higher returns in that country.
2023/24 FINANCIAL YEAR BUDGET
On 22 February 2023, Finance Minister Iipumbu Shiimi tabled the 2023/24 budget in the National Assembly under the theme “Economic Revival and Caring for the Poor”.
The budget makes provision for a total revenue of N$74.7 billion, an increase of 16.5% on the revised total of N$64.1 billion in the 2022/2023 budget. The increase is largely due to the rise in revenue from the Southern African Customs Union (SACU) from just over N$14 billion to well over N$24 billion.
The total expenditure was projected to increase by 13% to N$84.5 billion: N$65.9 billion for the operational budget, N$8.5 billion for the development budget and N$10.2 billion for interest payments. Shiimi said the budget deficit of N$9.1 billion would be financed through a combination of domestic debt instruments and funding from multilateral organisations.
Personnel expenditure for the country’s 107,000 civil servants continues to account for nearly 50% of the operational budget despite repeated calls for the reduction of the size of the civil service. The appropriation to the Public Service Employees Medical Aid Scheme (PSEMAS), which has cost taxpayers billions of Namibian dollars as a result of fraudulent activities, has been reduced from N$3.2 billion for the 2022/23 financial year to N$2.7 billion during the 2023/24 financial year.
The education sector once again received the highest share of the budget with a total appropriation of N$20.6 billion which represents 28.4% of the budget. The health cluster was allocated N$9.7 billion. The Ministry of Health and Social Services received the second largest appropriation of N$9.39 billion or 14.2% of the operational budget.
Increases effective from 1 April 2023:
The old age grant and the disability grant will be increased from the current N$1,300 to N$1,400 per month.
The orphan and vulnerable children grant will be increased from N$250 per month to N$350. The disability grant for beneficiaries under the age of 18 will be increased from N$250 to N$1,400 per month. An amount of N$69.8 million has been set aside to expand the coverage of the orphan and vulnerable children grant through accommodating approximately 30,000 eligible children on the waiting list.
TAX RELIEF MEASURES
The minister announced that the corporate income tax rate for nonmining companies would be reduced to 31% from the current 32% with effect from 1 April 2024 with a further reduction to 30% with effect from 1 April 2025.
The tax-exempt threshold for individual income taxpayers would be increased from the current N$50,000 to N$100,000 with effect from the 2024/25 financial year.
He also announced that the tax amnesty programme would be extended for the final time and that interest and penalties would be written off if outstanding capital is fully settled by 30 October 2024.
Public debt is projected to increase by 7.2% from N$140.8 billion (68.9% of the GDP) during the 2022/23 financial year to N$150.9 billion (70.1% of the GDP) in 2023/24. The minister said, “In nominal terms, the debt stock is still growing marginally above the growth in nominal GDP, and we aim to gradually close this gap towards the end of the 2022/23 to 2024/25 Medium Term Expenditure Framework (MTEF).”
SOVEREIGN WEALTH FUND
Finance Minister Iipumbu Shiimi announced in his February 2023/24 budget speech that a technical team is finalising inputs from stakeholders into a draft bill on the sovereign wealth fund, known as the Welwitschia Fund, and said the ministry aims to table the bill in parliament during the 2024/25 financial year. He said the fund remains with the initial seed capital of N$300 million as it was not possible to capitalise the fund from current revenue streams without increasing debt. The management and administration of the fund, which was launched in May 2022, will be delegated to the BoN.
BAN – Bankers Association of Namibia
P O Box 195, Windhoek
Tel: +264 61 299 2116
EAN – Economic Association of Namibia
P O Box 21459, Windhoek
Tel: +264 61 244 300
ICAN – Institute of Chartered Accountants Namibia
P O Box 21459, Windhoek
Tel: +264 61 220 218
Financial Intelligence Center
P O Box 2882, Windhoek
Tel: +264 61 283 5287
NIPA – Namibia Institute of Professional Accountants
P O Box 90756, Windhoek
Tel: +264 61 382 700
NSE – Namibia Stock Exchange
P O Box 2401, Windhoek