IMF Projects Subdued Growth Outlook for Namibia Amid Global and Sectoral Headwinds
The International Monetary Fund (IMF) has projected subdued economic growth for Namibia in 2026, following a slowdown in 2025 driven by weak diamond demand and lingering effects of drought on livestock production.
This follows a staff mission led by Ms. Xiangming Li to Windhoek from March 16–20, 2026, as part of the Fund’s 2026 Article IV Consultation with Namibia.
According to the IMF, Namibia’s real GDP growth slowed to 1.7% in 2025 and is expected to remain muted in 2026, partly due to spillover effects from ongoing conflicts in the Middle East, including higher fuel costs and weaker global demand.
Inflation, however, eased in 2025 and continued its downward trend into early 2026, reaching 2.4% year-on-year in February. Despite this moderation, rising fuel prices are expected to exert upward pressure on inflation over the course of the year.
The country’s external position showed modest improvement, with the current account deficit narrowing to 13.2% of GDP in 2025 from 15.2% in 2024, supported by stronger uranium and gold exports.
Nonetheless, the IMF noted that the deficit remains elevated and is expected to persist, largely due to import demands linked to foreign direct investment in oil exploration and mining activities.
Gross international reserves declined following the repayment of a $750 million Eurobond in October 2025, with reserve cover standing at 3.5 months of imports at end-2025.
The IMF cautioned that the global environment poses significant downside risks to Namibia’s outlook, particularly through commodity price volatility, tighter financial conditions and potential further weakening in diamond demand.
On the domestic front, the fiscal deficit widened significantly in the 2025/2026 fiscal year, primarily due to a sharp drop in revenues from the Southern African Customs Union (SACU).
The Fund welcomed government’s planned fiscal consolidation under the 2026/2027 budget, which includes reforms to the Public Service Employees Medical Aid Scheme (PSEMAS), reduced transfers to state-owned enterprises, and tighter control over public spending.
It stressed, however, that sustained fiscal adjustment will be required to place public debt on a firm downward trajectory, underscoring the need for expenditure restraint, improved revenue mobilisation and civil service reforms to contain the public wage bill.
Monetary policy has remained steady, with the Bank of Namibia maintaining its policy rate at 6.5% in February 2026, preserving a 25-basis-point differential with the South African Reserve Bank. The IMF noted that the banking sector remains stable, with adequate liquidity and capital buffers, while non-performing loans declined to 4.3%.
The Fund urged the central bank to remain vigilant amid global uncertainty and to take necessary measures to safeguard the currency peg and maintain adequate reserve levels.
On structural reforms, the IMF emphasised the need to improve the business environment, accelerate digitalisation, and align education with labour market demands to support diversification and job creation.
Progress has also been recorded in strengthening financial sector oversight and anti-money laundering frameworks, with Namibia expected to exit the Financial Action Task Force grey list within the year.
