The FY2024/2025 Namibian budget, presented by Finance Minister Iipumbu Shiimi under the theme “continuing the legacy of Dr. Hage G. Geingob by caring for the Namibian child”, aims to address the country’s economic challenges while ensuring responsible financial management.
The budget focuses on stimulating economic growth, enhancing infrastructure, and supporting social welfare. However, it must also navigate the complexities of maintaining fiscal discipline.
Subsequently, Simonis Storm has presented a review which examines the key elements of the budget, assessing its potential to foster sustainable development and meet the needs of the population in a balanced manner.
- Policy priorities
Provisions of N$2.5 billion in FY2024/25 towards railway infrastructures, consisting mainly of N$1.9 billion for the upgrading of the Kranzberg-Otjiwarongo railway section and N$488 million for the rehabilitation of the Sandverhaar-Buchholzbrunn railway section in the south. A total of N$6.6 billion is earmarked for the railway network development over the MTEF, this is a positive outturn, but concerns remain around who is managing the railway system. Capital budget of N$970 million to the Ministry of Education, Arts and Culture to cater for the construction and renovation of classrooms and other school infrastructures. The budget is really speaking to its theme of “….caring for the Namibian child”. The FY2024/25 budget has allocated a total of N$700 million to the informal settlements upgrading, massive land servicing and other programs to improve access to housing opportunities nationwide. This plays a significant role in not only improvement of infrastructure or services but also improving the living standards and quality of life for Namibians. An allocation of N$200 million in FY2024/25 and N$200 million in FY2025/26 has been made to support NamPower in funding the development of the 40MW Otjikoto Biomas Power Station. The vote of Water received N$2.2 billion in FY2024/25 including N$1.1 billion in loan funded projects.
- Revenue Revenue
collections stood at N$72.0 billion, a collection rate of 90.6% over the first 10 months of the financial year, significantly higher than the historical average. Corporate income tax, VAT, withholding tax on services, and tax on royalty showed strong collections. Total revenues are estimated at N$90.4 billion for FY2024/25, an increase of 11.5% from the previous year. Revenue growth over the MTEF is projected to average 5.0%, reaching N$93.6 billion by FY2026/27.
Tax environment: Tax Relief for Low-Income Earners: The threshold for Income Tax on Individuals is increased from N$50,000 to N$100,000.
Business Environment: The reduction of the corporate tax rate from 31% (effective 1 January 2024) to 28% by FY2026/27 is a notable move to align Namibia’s tax rates with regional and global standards. This reduction is expected to make Namibia more attractive to investors, encouraging both domestic and foreign investment. The phased reduction, starting with a decrease to 31% in 2024 and further to 30% in 2025, provides a gradual transition for businesses to adjust to the new tax regime.
Introduction of a 10% Dividend Tax: The implementation of a 10% dividend tax, effective from January 2026, is aimed at addressing the disparity in the tax treatment of dividends paid to non-resident shareholders, which are currently subject to tax. This measure is expected to create a more equitable tax system and generate additional revenue for the government.
Special Economic Zones (SEZ) Regime: Participants in the SEZ will be subject to a corporate income tax rate of 20%. VAT Registration Threshold: The mandatory registration threshold for VAT is increased from N$500,000 to N$1,000,000. Digitalization and Compliance: The exploration of a VAT e-invoicing system and the continuation of the Tax Amnesty Program are initiatives to improve tax compliance and administration efficiency.
- Expenditure
Non-interest expenditure at the end of January 2024 stood at N$54.1 billion, equivalent to 70.7% of the revised expenditure numbers. The spending rate is below historical levels, indicating no significant expenditure overruns expected by the end of the financial year. Total expenditure for FY2024/25 is projected at N$100.1 billion, an increase of 12.4% from the previous year. The operational budget is estimated at N$74.6 billion, representing an increase of 8.8 percent over the FY2023/24 estimates. The increase in operational expenditure largely reflects the 5.0 percent adjustment in the civil service wage bill at a cost of N$1.7 billion to guard against the erosion of purchasing power. The wage adjustment is effective from 01 April 2024. The development budget has been increased significantly by 58.1% to N$12.7 billion, which includes N$3.2 billion in grant-funded and loan-funded projects. This budget allocation is equivalent to 4.6% of GDP, an improvement from previous years.
Social Spending
Based on the improved economic and revenue outlook, MoF believes there is more room to make necessary allocations to address urgent needs of the poor. The budget of the Ministry of Gender, Poverty Eradication and Social Welfare has increased to N$8.0 billion in FY2024/25. While the Ministry of Gender, Poverty Eradication and Social Welfare has increased by 23.2 percent to N$8.0 billion in FY2024/25. With that, the Old Age Grant and the Disability Grant will be increased from N$1,400 to N$1,600 per month effective on 01 April 2024. Increase the frequency of food distribution to marginalized communities at a cost of N$170 million. N$284.5 million to ensure full coverage of the Orphan and Vulnerable Children Grant. Over the MTEF In total, social grants cost the government N$24.5 billion for FY2024/25.
- Budget Deficit & Debt Servicing
The budget deficit for FY2024/25 is expected to improve to 3.2% of GDP. Public debt is estimated at N$165.8 billion or 60.1% of GDP during FY2024/25, a reduction from the previous year. The total debt stock stood at N$151.3 billion, equivalent to 61.3% of GDP. Public debt growth has stabilized, and debt metrics have started declining, driven by strong growth in nominal GDP. Total Interest Payments: The government has budgeted N$12.8 billion for meeting debt servicing obligations, which includes interest payments. This amount is equivalent to 14.2 percent of revenues and 4.7 percent of GDP. Public debt is projected at N$165.8 billion or 60.1% of GDP for FY2024/25, with measures in place to ensure debt sustainability.
The government has budgeted N$12.8 billion for meeting debt servicing obligations, which includes interest payments. This amount is equivalent to 14.2 percent of revenues and 4.7 percent of GDP. Debt servicing metrics, although stabilizing, remain above the desired benchmark of 10% of revenues. A significant portion of the GRN debt is due for repayment – largest among these maturities is the US$750 (N$14.3 billion) Eurobond due on 29 October 2025- this will be the largest single day debt maturity in the history of the country. GRN will commit to redirect part of the increased revenue towards the sinking fund to manage the rollover risk and contain increases in future debt obligations.
Eurobond Repayment: The government is committed to redirecting part of the increase in revenues towards the sinking fund to manage the rollover risk and contain future debt service obligations. Specifically, at least N$3.5 billion during FY2024/25 and some N$2.0 billion in FY2025/26 of the Southern African Customs Union (SACU) receipts will be transmitted to the sinking fund to retire twothirds of the US$750 million Eurobond due on 29 October 2025.
External debt is estimated to increase by N$2.4 billion in FY2024/25 and decline in FY2025/26 because of the partial Eurobond redemption. On the external debt portfolio, bilateral arrangement for external project financing, negotiations with the African Development Bank (AfDB) have been concluded, securing a total funding of N$3.7 billion for the upgrading of the railway line.