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Namibia

Namibia’s Rating Upgraded: Importance for the Country and Its People

todayJune 6, 2024 12

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By Josef Kefas Sheehama

 

 

Periodically, the Namibian government establishes policies to address the unstable state of the economy. Encouraging economic growth requires policymakers to put in place measures that support investment, innovation, and entrepreneurship.

Therefore, the government can assist in fostering an environment that is conducive to business and promotes employment and economic growth.

As an Independent Economic and Business Researcher, I therefore wholeheartedly commend the government of Namibia for its sound economic policies, which have led to positive development. In addition, I concurred with Minister Shiimi that Namibia’s enhanced prospects for economic growth are reflected in the upgrade, which is being driven by rising commodity prices, increased investments in conventional mining, and possible developments in hydrocarbon and renewable energy resources. He emphasized that the favorable prognosis is a result of prudent financial management by the government, a low public debt that has decreased from 70% to 60%, and an investor-friendly policy framework. Against this background, Moody’s upgrades Namibia’s sovereign credit rating outlook from stable to positive, maintaining the current rating at B1. This is good news for investors, as it recognizes the government’s track record of responsible financial management, the maintenance of low public debt, and an investor-friendly policy framework, which is supported by political and economic stability as well as steady growth prospects. The Minister of Finance and Public Enterprises, Hon. Iipumbu Shiimi, has also expressed support for these developments.

Furthermore, this rating upgrade reflects Namibia’s commitment to economic stability, growth, and responsible financial practices. It bodes well for the country’s future development and prosperity. An improvement in rating enhances Namibia’s standing and draws more investors to its equities. This enhanced allure may draw in more foreign direct investment, strengthen trade ties, and

encourage domestic investment, all of which will support economic growth and stability. The credit ratings assigned by organizations such as Moody’s are crucial to the world economy. They serve as a gauge of a country’s creditworthiness, which affects investor confidence and a country’s ability to access global capital markets. A higher rating denotes a lower risk associated with investments, whereas a lower rating implies a higher risk.

It is significant to remember that Namibia was rated as investment grade at the outset by Moody’s and Fitch in September 2011 because of its strong credit standing at the time. But beginning in 2016 and 2017, the country experienced severe economic difficulties brought on by falling commodity prices and other unfavorable external factors. This resulted in a string of downgrades, which ended in the loss of the country’s investment grade status by 2020. In response, the government enacted a slew of significant reforms meant to stabilize and stimulate the economy. Among the important initiatives was bolstering revenue administration, which raised government revenue significantly. It is impressive that the Minister has the same outlook on the economy and has collaborated with rating agencies to lower debt to GDP and boost domestic revenue (NAMRA), among other things.

Additionally, Namibia’s economy is progressively moving in a sustainable direction at the moment. On the other hand, slow economic growth perpetuates inequality, unemployment, and poverty. In addition to endangering economic growth, high income inequality exacerbates social disintegration. The extreme divergence of viewpoints brought about by inequality makes compromises challenging. The impasse that results from this uncertainty in policy can exacerbate economic weakness. We must keep addressing our economic problems, which necessitates a quick focus on measures that will increase Namibia’s potential growth. Reforms that increase Namibia’s potential growth rate as demonstrated by Moody’s assessment are necessary for the country’s economy to follow a sustainable trajectory. In order to foster higher long-term sustainable growth, the government should keep implementing reforms that can accelerate Namibia’s growth in the near term. A globally competitive economy should be created by these growth reforms, which should also encourage labor-intensive growth.

Furthermore, it should be mentioned that appropriately sized local content regulations can attract technology transfers and financial investments that will help Namibia compete to draw in the best international community and investors looking to find the most alluring markets to cut costs and increase efficiency. Increased investor confidence is a result of Namibia’s political stability. In order to avoid impeding development and growth, policies for the oil and gas industry or the implementation of stricter monitoring procedures should be rationalized both economically and realistically. Therefore, controls are required; however, we also need to assess the degree to which controls present obstacles and develop plans of action to reduce their effects. The Bank of

Namibia has to consider the possibility that the tight exchange control laws in Namibia will make it more difficult for the oil and gas industry to grow. In response to financial crimes, anti-money laundering (AML) is imperative. However, Namibia must exercise caution to avoid losing foreign direct investment (FDI) as a result of an unduly stringent exchange control policy.

Moreover, The Namibian economy is expected to contract in 2024 before picking up steam in 2025, according to the Bank of Namibia. According to estimates, the domestic economy will contract to 3.7 percent in 2024 and then grow to 4.1 percent in 2025. Weaker global demand and slower primary industry growth are the main causes of the anticipated slowdown. But in 2025, GDP growth is anticipated to slightly improve, mostly due to a rebound in the mining and agriculture sectors. In comparison to comparable projections released in the December 2023 Economic Outlook update the most recent estimates for 2024 and 2025 show an upward revision of 0.3 and 1.0 percentage points.

Therefore, policymakers should acknowledge that sound policies benefit countries as a whole but makes some citizens richer and others poorer. Revitalizing consensus on policies among political parties and the public at large requires looking back, underlining the good things that policy has achieved; but also looking forward, devising new ways of making trade policies more inclusive and equitable for everyone.

In conclusion, given that Namibia finds itself at a crossroads, managing its external and fiscal issues will be essential to figuring out its future economic course and enhancing its standing in the global economy.

Although the road ahead is full of obstacles, Moody’s upgrade offers some hope and is evidence of the potential benefits of significant fiscal discipline and economic reform.

Written by: Staff Writer

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