Namibia’s fiscal health showed marked improvement in March 2025 as the government’s net financial balance surged 65.9% to N$7.5 billion, up from N$3.9 billion in February, signaling reduced short-term liquidity pressures despite persistent medium-term fiscal uncertainties. The rebound, detailed in the latest Private Sector Credit Extension (PSCE) report from the Bank of Namibia (BoN), comes alongside a revival in corporate borrowing and cautious household spending, painting a mixed picture of an economy navigating global headwinds while capitalizing on domestic opportunities.
The liquidity boost reflects tighter fiscal management and improved revenue collection, though analysts warn that looming debt maturities and reliance on volatile Southern African Customs Union (SACU) receipts could test resilience. Meanwhile, private sector credit growth accelerated to 5.0% year-on-year (y/y) in March — the fastest pace in five years — driven by robust corporate demand, particularly in mining, manufacturing, and energy sectors. Corporate credit expanded by 8.2% y/y, its strongest performance since December 2019, underscoring renewed business confidence as firms invest in operational capacity and capital projects. Household credit, however, lagged at 2.8% y/y, constrained by stagnant wages, high unemployment, and lingering debt burdens.
The corporate credit resurgence was broad-based, with loans and advances — the largest component — jumping 14.8% y/y, up from 9.6% in February. Instalment and leasing credit soared 20.6% y/y, reflecting investments in machinery and vehicles, while overdraft lending turned positive at 4.6% y/y after 13 months of contraction. Key sectors driving this demand include mining, where firms are expanding exploration activities, and energy, buoyed by upcoming oil and gas projects. Tourism and financial services also contributed, capitalizing on a mild recovery in domestic and regional travel.
Despite this momentum, corporate mortgage credit contracted 2.3% y/y, highlighting hesitancy to commit to long-term assets amid macroeconomic uncertainty. “Businesses are prioritizing short-term liquidity and operational needs over fixed investments,” noted Cheryl Emvula, an economist at First National Bank (FNB). “This reflects both caution and strategic adaptation to volatile commodity prices and geopolitical risks.”
Households remain cautious, with mortgage credit — representing 66% of household debt — declining 0.6% y/y. Instalment and leasing credit rose 14.5% y/y, driven by vehicle financing, but overdrafts remained deeply negative (-12.5% y/y), signaling constrained disposable incomes. “Persistently high unemployment and low wage growth continue to limit borrowing capacity,” said Ndateelela Amukuhu, a graduate analyst at FNB. “Until consumer confidence rebounds, household credit will anchor overall PSCE growth on the downside.”
Headline inflation accelerated to 4.2% y/y in March, up from 3.6% in February, driven by food, housing, transport, and alcohol prices. While inflation remains within the BoN’s target range, risks are tilted upward due to global commodity volatility and rising utility costs. The BoN held its repo rate steady at 6.75% in April, mirroring South Africa’s pause, but flagged concerns over declining foreign reserves, which fell to N$59.7 billion (3.9 months of import cover) from N$64.3 billion in February. Excluding oil and gas imports, cover stands at 4.8 months, deemed sufficient but vulnerable to external shocks.
“Reserve adequacy will face pressure from lower SACU receipts, elevated imports, and Eurobond maturities,” the BoN warned, emphasizing the need for cautious monetary policy. The central bank also highlighted risks from domestic electricity tariff hikes and global economic instability, factors likely to delay rate cuts despite stable inflation.
Broad money supply (M2) grew 10.1% y/y in March, slightly down from 10.6% in February, as currency circulation and transferable deposits contracted. However, institutional deposits surged 17.4% y/y, indicating sustained confidence in Namibia’s banking sector. “This growth underscores institutional investors’ trust in financial stability, even as households remain wary,” Emvula added.
The government’s liquidity improvement, while notable, masks underlying fiscal vulnerabilities. With domestic borrowing requirements still high, any revenue shortfalls or expenditure overruns could strain public finances and crowd out private credit. Analysts urge policymakers to prioritize structural reforms, including diversifying revenue streams and enhancing SACU revenue predictability.
Looking ahead, Namibia’s economic trajectory hinges on balancing corporate sector dynamism with household recovery. The anticipated rollout of oil and gas projects, coupled with favorable agricultural prospects due to improved rainfall, offers hope for sustained growth. However, global geopolitical tensions and commodity market fluctuations remain wildcards.
For now, the March data paints a tale of two economies: a resurgent corporate sector driving credit and investment, and a cautious household sector grappling with entrenched challenges. As the government navigates its improved but fragile liquidity position, the focus must shift to fostering inclusive growth — ensuring that private sector gains translate into broader economic resilience.