Debt climbs as fiscal repair begins
Namibia’s public finances are beginning to move in the direction of lower budget deficits, but the government’s debt burden continues to rise, highlighting the fiscal challenge facing the economy despite stronger growth.
Central government debt reached N$181.9 billion at the end of June, equivalent to 65.1% of gross domestic product, according to the Bank of Namibia’s (BoN) September 2026 Quarterly Bulletin.
The debt stock was 6.1% higher than a year earlier and rose 2% during the second quarter, driven mainly by increased domestic borrowing through treasury bills and internal registered stock.
The government’s fiscal position is nevertheless expected to improve over the medium term, the central bank noted.
The budget deficit is projected to narrow to 5.5% of gross domestic product (GDP) in the 2026/27 financial year, from 6.6% in 2025/26, and to 3.3% by 2028/29.
That means the immediate challenge is shifting from containing the flow of new borrowing to managing the existing debt stock.
The apex bank projects total government debt to reach N$217.3 billion by 2028/29 and to average about 67% of GDP over the medium-term expenditure framework period, remaining above the Southern African Development Community (SADC) benchmark of 60%.
Fiscal repair, but a larger debt stock
The government expects to narrow the deficit by increasing revenue faster than expenditure.
Revenue is projected at N$89.8 billion in 2026/27, up 2.5% from the revised preliminary outturn of N$87.4 billion in 2025/26.
Expenditure is expected to increase by just 0.1% to N$106 billion.
Of that amount, N$81.3 billion is earmarked for operational spending, N$8.4 billion for development spending and N$16.2 billion for interest payments.
The government is also targeting a positive primary balance, revenue exceeding expenditure before interest payments, as part of efforts to stabilise the debt stock.
The figures suggest that fiscal consolidation is beginning, but the benefits will take time to show in the overall debt ratio.
Net central government debt, which excludes government deposits, increased by 11.2% over the year to N$176.2 billion.
External government debt declined, helped by repayments on bilateral and multilateral loans and the appreciation of the US dollar. The overall debt increase was therefore concentrated in domestic borrowing.
External deficit adds pressure
The fiscal adjustment is also taking place against a weaker external position.
Namibia’s current-account deficit widened to N$12.1 billion in the second quarter, from N$10.7 billion in the first quarter and N$5.3 billion a year earlier.
The central bank attributed the deterioration mainly to a wider merchandise trade deficit and higher payments for services.
Foreign reserves provide some cushion. Reserves rose 9% during the quarter to N$56.4 billion at the end of June, equivalent to 3.5 months of import cover.
They increased further to N$58.5 billion by August.
The Bank said the increase in August was mainly driven by net South African rand inflows from commercial banks and customer foreign-currency placements.
Namibia’s real effective exchange rate also appreciated by 4.1% year-on-year, which the central bank attributed to domestic inflation running higher than that of its trading partners. It said this represented a moderate decline in the competitiveness of Namibian products in international markets.
Growth provides some breathing room
The more positive part of the picture is that the economy is expanding at a faster pace.
Real GDP growth accelerated to 4.8% in the second quarter, from 3.1% in the first quarter and 1.7% a year earlier.
The improvement was broad enough to provide some support to the fiscal outlook, with services leading growth.
Health, wholesale and retail trade, information and communication, and financial services were among the strongest performers.
Agriculture also maintained robust growth, supported by favourable rainfall and a recovery in the national herd, while fishing expanded.
Mining remained in contraction and construction weakened, limiting growth in the secondary sector. Manufacturing recorded moderate growth, helped by a recovery in diamond cutting and polishing.
Fixed capital formation expanded at a double-digit rate, while government and household consumption also increased.
The stronger growth rate matters for the debt outlook because a faster-growing economy can improve the relationship between debt and national output.
