THE Namibian government has managed to plug the current fiscal year’s budget deficit by 25% after the International Monetary Fund approved its N$4 billion loan request last week.
The approval granted last Thursday, comes almost 11 months after the application was made.
According to the Washington-based fund, Namibia, like many other countries, has been severely affected economically by the Covid-19 pandemic, and this US$270,8 million (N$4 billion) is much needed.
IMF said the funds would finance response to the Covid-19 health emergency, including the purchase of vaccines and deployment of vaccination campaign teams needed to mitigate the severe socio-economic impact of the pandemic.
When finance minister Iipumbu Shiimi tabled the national budget last month, he revealed that the government’s kitty is expected to be lean this fiscal year at N$52,1 billion, down from an estimated N$55,5 billion last year.
Matched with expenditure of N$67,9 billion, this brings the budget deficit to N$15,8 billion and it is this deficit that the IMF loan will reduce.
Local analysts were concerned that the expected reduced revenue this year would exert enormous pressure on treasury and could interrupt the supply of needed services to the citizenry.
According to the IMF, the worsening global conditions and the local outbreak of Covid-19 have deteriorated Namibia’s short-term macroeconomic outlook. This has also hindered mining exports, tourism, investment inflows and weighed on tax revenues, which all pointed to the need to help Namibia.
The N$4 billion loan is the first transaction the fund is entering with Namibia since becoming a member in 1990.
The loan was approved under the IMFs Rapid Financing Instrument (RFI) programme and does not come with stringent conditions.
It is not clear whether the fund will track the usage of the funds but hinted that the funds were to respond to the economic fallout because of Covid-19.
“The outright purchase under the RFI will provide needed financing to support the authorities’ implementation of their response to the Covid-19 crisis, including the purchase of vaccines and deployment of the vaccination campaign, and interventions needed to mitigate the pandemic’s severe socio-economic impact,” read the announcement note.
Moreover, the fund said key elements include stepping-up emergency health and education spending, strengthening social safety nets to protect the most vulnerable from the impact of the crisis, and supporting the private sector and protecting jobs should take a cut from the loan.
“The implementation of public finance governance mechanisms will ensure appropriate use and monitoring of resources to address the Covid-19 crisis,” said the fund.
The finance ministry’s spokesperson Tonateni Shidhudhu, responding to the IMF’s announcement, said the loan repayment period is five years, at an interest rate of 1,1%.
Shidhudhu did not give further details on the repayment terms so it is unknown whether it is over the years or one lump sum at the end of the loan period. He also did not state how the interest rate is to be applied, whether it is over the loan term or annually.
The IMF’s acting chair and deputy managing director, Mitsuhiro Furusawa, said the disbursement will support Namibia to promptly address these needs and help catalyse additional financing from development partners.
“As the impact of the crisis subsides, the authorities will implement a growth-supporting medium-term fiscal consolidation aimed at preserving debt sustainability. To this end, moving forward with planned fiscal reforms to increase expenditure efficiency and mobilise additional tax revenues will be key. Structural reforms remain essential to promote broad-based, inclusive growth,” he said.
Namibia’s public debt is estimated to reach N$130 billion this fiscal year.