Investing.com -- Fitch Ratings has confirmed Namibia’s Long-Term Foreign Currency Issuer Default Rating (IDR) at ’BB-’ with a stable outlook on Friday, 23 May 2025. This rating is backed by Namibia’s solid governance indicators, institutional framework, and fiscal financing flexibility supported by the large non-banking financial sector (NBFS). However, these are balanced against high fiscal deficits, government debt, large fiscal financing needs, and a rigid expenditure profile.
Fitch anticipates a slight recovery in real GDP growth to 3.8% in 2025, up from 3.7% in 2024. This is expected due to normalization of rainfall patterns, boosting agricultural activity, and the services sector will be strengthened by a pickup in tourism, and strong activity in transport and wholesale and trade. Additionally, a recovery in the uranium sector and higher gold production will support the economy, while diamond production is likely to be subdued due to lower prices. Oil and gas exploration have contributed to growth, but momentum is expected to slow by 2026 ahead of final investment decisions.
Inflation is expected to decrease to 4.0% in 2025 from 4.2% in 2024. The Bank of Namibia (BoN) has kept its policy rate at 6.75% after four rate cuts totaling 100 basis points since August 2024, reflecting concerns over renewed inflationary pressures. The policy rate is currently 75 basis points below the policy rate of South Africa. Fitch expects the BoN’s monetary policy to remain consistent with the sustainability of the long-standing peg arrangement of the Namibian dollar to the South African rand.
Government revenue is expected to face downward pressure due to weaker traditional revenue drivers, the diamond sector, and Southern African Customs Union (SACU) receipts. Diamond-related revenues fell below 1% of GDP in the fiscal year ending March 2025 (FY24), from about 2% of GDP in FY23, and a rebound is unlikely. SACU receipts are expected to fall by 24% in FY25, to 8% of GDP, compared to about 12% in FY24, with medium-term prospects uncertain.
Fitch anticipates a widening of the fiscal deficit to 5.0% of GDP in FY25, 0.4 percentage points higher than the general government’s (GG) budget target and the projected ’BB’ median of 2.8%. This follows slippage in FY24, when the deficit reached 3.9% of GDP, 0.7 percentage points higher than budgeted as expenditure growth outpaced revenue. Spending pressure will continue due to high social spending and debt servicing.
Gross borrowing needs will rise to 32% of GDP in FY25 due to a USD750 million Eurobond maturing in October, before falling to a still high 26% in FY26. The bond will be repaid with USD500 million from sinking funds and external or domestic financing. Sinking funds totaled USD463 million at end-FY24, with contributions of NAD1.0 billion (0.4% of GDP) quarterly from SACU receipts.
Fitch estimates GG debt/GDP remained well above the 2024 ’BB’ median of 53.8% of GDP, at 67.2% due to increased borrowing to finance the budget deficit. GG debt is projected to stabilize at about 65% of GDP but remain above ’BB’ peers.
Namibia’s current account deficit widened to an estimated 15.4% of GDP in 2024, reflecting large machinery and services imports related to hydrocarbon and renewable energy projects. Foreign direct investment inflows are expected to finance the current account deficit. International reserves are forecasted to drop to about USD2.8 billion, from USD3.3 billion at end-March 2025 after the bond redemption.
Namibia has an ESG Relevance Score (RS) of ’5[+]’ for Political Stability and Rights and the Rule of Law, Institutional and Regulatory Quality and Control of Corruption, reflecting stable politics, moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law and moderate corruption.
Factors that could lead to a downgrade include a marked increase in government debt-to-GDP, weaker than projected trend growth, or increased external vulnerabilities. On the other hand, factors that could lead to an upgrade include stronger medium-term growth prospects or a significant reduction in government debt-to-GDP over the medium term.
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