Debt interest eats 19% of revenue
Interest payments could consume nearly a fifth of Namibia’s government revenue this financial year, adding to pressure on public finances, according to Simonis Storm Securities.
The research firm forecasts an interest bill of N$16.6 billion, up from the N$16.2 billion budgeted, as higher borrowing costs and inflation-linked payments increase the cost of servicing government debt.
The projected bill would account for about 19% of forecast revenue, compared with a median of about 11% for countries in the BB rating category, based on figures from Fitch cited by Simonis Storm.
The interest bill is also equivalent to about 2.5 times the N$6.5bn allocated to development spending through the State Revenue Fund, excluding externally funded projects.
“The overshoot is concentrated in the one line Treasury cannot cut: interest,” Simonis Storm said in its Mid-Year Budget Review Preview 2026/27, published on 19 October.
The firm said the increase was largely driven by the repricing of government Treasury bills and the indexation of inflation-linked bonds.
The budget was prepared when the Bank of Namibia’s repo rate stood at 6.5% and inflation was close to 3%. The central bank subsequently raised the repo rate to 6.75% in June, while annual inflation reached 5.4% in September.
Simonis Storm estimates that every one-percentage-point increase in funding costs adds about N$800 million a year to interest costs on the Treasury bill book and new government bond issuance alone.
It said the impact would compound as the public debt stock grows.
The projected interest bill forms part of a wider deterioration in the fiscal outlook. Simonis Storm forecasts total government revenue and grants of N$87.5bn, N$2.1bn below the N$89.6bn budgeted, while the budget deficit could widen to 6.5% of gross domestic product from the planned 5.5%.
The firm also expects the government’s promised primary surplus, which excludes interest payments, to turn into a deficit of 0.7% of GDP.
Simonis Storm said the interest-to-revenue ratio was the most important fiscal metric to watch in the forthcoming mid-year budget review.
The review is expected before the end of October and will provide an opportunity for the ministry of finance to update its revenue, expenditure and borrowing projections.
