CHAMWE KAIRA
The country’s fiscal deficit is projected to widen to 6.5% of gross domestic product (GDP) in the 2026/27 financial year, driven by a N$2.1 billion revenue shortfall, rising debt-servicing costs and economic pressures from foot-and-mouth disease (FMD) and El Niño.
This is according to a Mid-Year Budget Review preview by Simonis Storm analyst Almandro Jansen, which forecasts that the government’s planned return to a primary budget surplus will give way to a primary deficit of 0.7% of GDP.
The minister of finance is expected to present the mid-year budget review before the end of October.
Simonis Storm projects government revenue at N$87.5 billion, below the budgeted N$89.6 billion. The shortfall is attributed mainly to weaker value-added tax collections, mining corporate tax revenue and lower diamond dividends.
Economic growth is also expected to slow to between 2% and 2.3% in 2026, compared with the Ministry of Finance’s initial forecast of 3.1%.
Although Namibia recorded real GDP growth of 4.0% in the first half of the year, the report warns that economic activity faces mounting pressure in the second half.
Mining output has contracted for six consecutive quarters, while agriculture is facing a severe El Niño-related dry season and an FMD outbreak detected in the Karasburg district on 23 September 2026.
Simonis Storm estimates that containing FMD could cost N$1.8 billion over the 2026/27 period.
Government expenditure is projected to increase to N$106.9 billion, compared with the budgeted N$106.0 billion, as spending pressures limit the scope for cuts.
The government’s interest bill is forecast to reach N$16.6 billion, equivalent to 19.0% of total revenue.
According to Simonis Storm, the increase reflects the June interest rate hike, rising treasury bill yields and inflation-linked bond adjustments, following an acceleration in annual headline inflation to 5.4% in September.
The report notes that Namibia’s interest-to-revenue ratio is significantly above the 11% median for countries rated in the BB category.
The combination of weaker revenue and higher expenditure is expected to place further pressure on the government’s fiscal position.
Public debt is projected to reach approximately N$201 billion, or 70% of GDP, by March 2027. This would exceed the budgeted target of N$193.8 billion, equivalent to 67.8% of GDP.
The report indicates that the government is increasingly relying on domestic markets to finance its borrowing requirements.
About 94% of the state’s N$29.2 billion financing requirement is expected to be raised locally through pension funds, insurers and commercial banks.
Simonis Storm warns that increased government borrowing from domestic financial institutions could crowd out private-sector credit.
Government debt securities increased by N$22 billion in the year to June, four times the growth in private-sector credit, according to the report.
Although Namibia is expected to remain capable of meeting its immediate financing obligations, the report says the government may need to absorb the larger deficit by reducing its cash buffer held at the central bank.
Simonis Storm also highlights refinancing risks linked to a projected N$25 billion maturity wall of domestic bonds scheduled for 2028/29 and 2029/30.
The bonds will need to be repaid or refinanced, creating additional pressure on government finances during those financial years.
The report notes that this refinancing period will precede significant expected revenue from Namibia’s offshore petroleum discoveries, including the Venus discovery, which is not expected to generate meaningful revenue before 2030.
The timing could leave the government facing substantial debt repayments before petroleum income becomes a significant source of public revenue.
