IMF warns Namibia against rising debt, recommends wage bill cuts

In its 2026 Article IV consultation report, the IMF cautioned that higher debt levels and increased government financing needs could lead to elevated borrowing costs, hinder investment, and strain the country's financial system. The fund noted Namibia's vulnerability to tighter global financial conditions, especially those in South Africa, given the close financial ties between the two nations. Higher interest rates in South Africa could quickly impact Namibia's economy.

The IMF stated that rising public debt and deficits would further increase long-term interest rates, tighten global financial conditions, amplify currency volatility, and reduce consumption and investment, exacerbating adverse debt dynamics. To mitigate these risks, the IMF urged Namibia to accelerate fiscal reforms, specifically recommending measures to durably reduce the wage bill and transfers, and implement bold structural reforms to support fiscal consolidation and private sector-led growth. The fund also advised strengthening financial safeguards, including considering macro-prudential measures like loan-to-value limits and counter-cyclical capital buffers.

For monetary policy, the IMF recommended aligning interest rate decisions with the South African Reserve Bank to maintain confidence and manage inflation expectations.