IMF pushes the gospel of fiscal consolidation again

THE International Monetary Fund (IMF) has again called on the government to continue to cut spending, bring the ever-growing debt under control and not let it become unsustainable.

So said the fund yesterday after concluding its Article IV consultations on the country.

These consultations are aimed at assessing economic and financial developments and discussing the country’s economic and financial policies with government and central bank officials.

IMF staff missions also often meet with parliamentarians and representatives of business, labor, and civil society.

At the end of the consultations, IMF mission chief Giorgia Albertin said the country should continue implementing the fiscal consolidation strategy, as preserving debt sustainability is crucial.

Namibia’s debt level is expected to reach a colossal N$140 billion by the end of this fiscal year, and borrowing in recent months has increased as millions of excess dollars have been swept from the market. .

Albertin said that this consolidation must enable growth and not reduce spending by the most vulnerable sectors of the local economy.

She stressed that the state must continue to “contain the wage bill, advance the reform of public enterprises and strengthen the tax administration”.

If nothing is done, Albertin said that high debt levels with limited economic growth could be detrimental to the country, and that the only way out of this undesirable state of the economy is through well thought-out fiscal consolidation, to bring the country back to some stability.

“This consolidation should not hamper the provision of necessary services, and the payroll, containing elements of remuneration such as travel allowances, could help tame the bill,” said the Italian economist.

The IMF said preserving macroeconomic stability, promoting structural reforms, and protecting the most vulnerable are key to fostering inclusive private sector-led growth and reducing unemployment and inequality.

“At the same time, it is important to preserve social spending and public investment that support growth and to mitigate the impact of rising food and fuel prices on the poorest. Strengthening the public financial framework will support fiscal consolidation,” the fund said.

Other items mentioned include a note to the Bank of Namibia that as inflationary pressures increase, keeping the policy rate broadly in line with the Reserve Bank of South Africa rate and an adequate level of reserves will support currency peg and anchor inflation.

“Building financial sector resilience and managing macro-financial risks will support financial stability.”

Albertin noted that by maintaining parity with the South African rand, Namibia was saved from a much higher rate of inflation, which would have shattered the economy.

Other notes are that there is a need for structural reforms to support economic diversification and improve productivity.

“Improving the business climate, promoting access to finance, strengthening governance and reducing the skills mismatch are key to fostering growth,” the fund said.

The fund expects the Namibian economy to grow by 3% in 2022 and 3.2% in 2023.

The full report of the consultations would be released in due course.

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