Foreign reserves dip, but BoN stays calm

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Phillipus Josef
  • 12 Hours Ago

Namibia recorded a twin deficit in 2025, with both the government budget and the current account in the red. Yet the Bank of Namibia (BON) insists the situation is development-driven and not cause for alarm.

The central bank's 2025 annual report, released yesterday, showed the budget deficit widened to 6.6% of GDP, up from a projected 5.9%, while the current account deficit narrowed slightly to N$35.2 billion from N$37.2 billion in 2024. Despite this, central bank governor Ebson Uanguta said the twin deficits "are not a problem," emphasising that much of the spending is geared towards long-term development projects such as infrastructure, energy, and emerging industries.

However, the report highlights rising external pressures. Namibia's foreign reserves dropped sharply from N$63 billion at the end of 2024 to N$51.6 billion in 2025, reducing import cover from 4.2 months to 3.3 months. The decline was driven mainly by the October 2025 Eurobond redemption, lower Southern African Customs Union (SACU) receipts, and higher net outflows in the South African rand. Governor Uanguta maintained that reserves remain "adequate," while acknowledging that the country remains exposed to external shocks and currency pressures.

The report attributes the twin deficits to development-driven imports and capital spending, particularly in sectors such as oil, gas, and green hydrogen. While imports remain high, much of the spending is being financed through foreign direct investment rather than domestic borrowing. BON projects that these investments could eventually narrow the deficits or even create surpluses if production ramps up and generates export revenue.

The governor also stressed the importance of prudent fiscal management. The report recommends a coordinated policy mix that balances spending restraint with revenue enhancement, including improved efficiency in public institutions, reduced wastage, and measures to diversify exports beyond raw minerals.