Namibia’s fiscal strategy faces a critical test as rising debt levels, costly refinancing pressures, and global market volatility threaten to undermine economic stability. A recent analysis by Simonis Storm Securities warns that the government’s reliance on aggressive borrowing—particularly through domestic markets and a looming Eurobond refinancing—risks pushing debt to unsustainable levels, with long-term consequences for growth and investor confidence.
Namibia’s public debt has entered a perilous phase, ballooning from N$144 billion in FY2023/24 to a projected N$168 billion by FY2025/26. This trajectory elevates the debt-to-GDP ratio to 68.5%, perilously close to the 70% threshold—a red flag for fiscal sustainability. Interest payments alone are set to consume N$13.7 billion in FY2025/26, surpassing total development expenditure and highlighting a stark trade-off: every dollar spent servicing debt is a dollar withheld from infrastructure, education, or healthcare.
The government’s borrowing mix has shifted dramatically toward domestic markets, which now absorb 74% of funding needs. While this shields Namibia from external volatility, it strains local financial institutions. Pension funds, insurers, and banks are nearing saturation with government bonds, raising concerns about rising yields and reduced liquidity. Longer-dated instruments like GC35-GC50 bonds dominate issuance, extending debt maturity but testing market appetite amid macroeconomic uncertainty.
A pivotal challenge lies in managing the US$750 million Eurobond maturing in October 2025. Though the government has pre-funded US$463 million via a Sinking Fund and plans additional contributions, a residual gap of US$125–150 million remains. How this shortfall is addressed—whether through reserves, concessional loans, or fresh borrowing—will signal Namibia’s fiscal prudence to global investors.
The report cautions against new Eurobond issuance in the near term, citing tight global liquidity, elevated interest rates, and widening risk premiums for similarly rated sovereigns. A misstep here could trigger rating downgrades or currency pressures, exacerbating repayment burdens. Instead, the focus should be on securing concessional financing and avoiding expensive market-driven refinancing that could destabilize foreign exchange reserves.
Namibia’s domestic borrowing strategy, while initially effective, shows signs of strain. Institutional investors, critical buyers of government paper, are increasingly concentrated in sovereign debt, limiting their capacity to absorb further issuance without demanding higher yields. This saturation risk is compounded by execution bottlenecks in infrastructure projects. Despite a record N$28.9 billion borrowing plan for FY2025/26—doubling the prior year’s figure—delays in capital spending could undermine the growth dividends needed to offset rising debt.
The infrastructure budget, though ambitious, faces historical hurdles: bureaucratic delays, procurement inefficiencies, and weak inter-ministerial coordination. Projects like the Swakopmund-Henties Bay road expansion, Omburu solar plant, and green hydrogen pilots must transition from allocations to tangible assets to justify their debt financing. Without accelerated delivery, borrowing risks becoming a liability rather than a growth catalyst.
To navigate these risks, the report underscores the need for structural reforms. Narrowing the fiscal deficit to 3–3.5% of GDP by FY2026/27 is essential, achievable through enhanced revenue mobilization—including digital VAT and tax compliance measures—and curbing non-productive expenditure. Simultaneously, diversifying funding sources, such as green bonds tied to renewable energy projects, could attract sustainability-focused investors and reduce reliance on traditional debt instruments.
The government is also urged to prioritize “growth-enabling” infrastructure—projects that lower logistics costs, boost regional trade, or expand energy access. For instance, completing the Walvis Bay port upgrades and coastal desalination plants would enhance Namibia’s competitiveness while creating jobs. Equally critical is addressing contingent liabilities from state-owned enterprises, which pose hidden risks to fiscal stability.
While Namibia’s institutional strengths—including central bank credibility and a deep local bond market—provide a buffer, investor patience is not infinite. The report warns that market confidence will hinge on visible progress in debt management and project execution. Transparency in handling SOE debts, coupled with stricter controls on state guarantees, will be vital to maintaining trust.
Namibia stands at a fiscal crossroads. The borrowing binge of recent years, while funding critical investments, has eroded fiscal buffers and left little room for error. The choice ahead is clear: double down on disciplined execution and reforms to convert debt into durable growth, or risk a spiral of rising borrowing costs and constrained development.
For policymakers, the message is unequivocal: prioritize efficiency over volume, sustainability over short-term fixes, and transparency over expediency. The stakes extend beyond balance sheets—they encompass Namibia’s ability to uplift its youth, modernize its infrastructure, and secure a resilient economic future. In this high-wire act, caution and precision must prevail.