Namibia’s Rating Upgrade: Importance for the Country and Its People

Periodically, the Namibian government establishes policies to address the unstable state of the economy.

Encouraging economic growth requires policymakers to put measures in place that support investment, innovation and entrepreneurship.

Therefore, the government can assist in fostering an environment conducive to business, which promotes employment and economic growth.

As an independent economic and business researcher, I wholeheartedly commend the government of Namibia for its sound economic policies, which have led to positive development.

I concurred with minister Iipumbu Shiimi that Namibia’s enhanced prospects for economic growth are reflected in the upgrade, driven by rising commodity prices, increased investments in conventional mining and possible developments in hydrocarbon and renewable energy resources.

Against this background, Moody’s upgraded Namibia’s sovereign credit rating outlook from stable to positive, maintaining the current rating at B1.

This is good news for investors, as it recognises the government’s track record of responsible financial management, the maintenance of low public debt and an investor-friendly policy framework, which is supported by political and economic stability as well as steady growth prospects.

The minister of finance and public enterprises has expressed support for these developments.

This rating upgrade reflects Namibia’s commitment to economic stability, growth and responsible financial practices.

An improvement in rating enhances Namibia’s standing and draws more investors to its equities.

This enhanced allure may draw in more foreign direct investment, strengthen trade ties and encourage domestic investment, all of which will support economic growth and stability.

The credit ratings assigned by organisations such as Moody’s serve as a gauge of a country’s creditworthiness, affecting investor confidence and a country’s ability to access global capital markets.

A higher rating denotes a lower risk associated with investments, whereas a lower rating implies a higher risk.

Namibia was rated as investment grade at the outset by Moody’s and Fitch in September 2011 because of its strong credit standing at the time.

But beginning 2016 and 2017, the country experienced severe economic difficulties brought on by falling commodity prices and other external factors.

This resulted in a string of downgrades, ending in the loss of the country’s investment grade status by 2020.

In response, the government enacted a slew of significant reforms meant to stabilise and stimulate the economy.

It is impressive that the minister collaborated with rating agencies to lower debt to gross domestic product (GDP) and boost domestic revenue.

Namibia’s economy is progressively moving in a sustainable direction.

Slow economic growth perpetuates inequality, unemployment and poverty.

In addition to endangering economic growth, high income inequality exacerbates social disintegration.

The impasse that results from this uncertainty in policy can exacerbate economic weakness.

We must keep addressing our economic problems, which necessitates a focus on measures that will increase Namibia’s potential growth.

In order to foster higher long-term sustainable growth, the government should keep implementing reforms that can accelerate Namibia’s growth in the near term.

A globally competitive economy should be created by these growth reforms, which should also encourage labor-intensive growth.

Appropriately sized local content regulations can attract technology transfers and financial investments that will help Namibia compete in drawing in the international community and investors looking to find alluring markets to cut costs and increase efficiency.
Increased investor confidence is a result of Namibia’s political stability.

To avoid impeding development and growth, policies for the oil and gas industry or the implementation of stricter monitoring procedures should be rationalised.

Controls are required, however, we need to assess the degree to which controls present obstacles and develop plans of action to reduce their effects.

The Bank of Namibia has to consider the possibility that the tight exchange control laws in Namibia will make it difficult for the oil and gas industry to grow.

In response to financial crimes, anti-money laundering is imperative.

However, Namibia must exercise caution to avoid losing foreign direct investment as a result of an unduly stringent exchange control policy.

According to estimates, the domestic economy will contract to 3,7 percent in 2024 and then grow to 4,1 percent in 2025.

Weaker global demand and slower primary industry growth are the main causes of the anticipated slowdown.

But in 2025, GDP growth is anticipated to slightly improve, mostly due to a rebound in the mining and agriculture sectors.

In comparison to comparable projections released in the December 2023 Economic Outlook update, the most recent estimates for 2024 and 2025 show an upward revision of 0,3 and 1,0 percentage points.

Therefore, policymakers should acknowledge that sound policies benefit countries as a whole, but makes some citizens richer and others poorer.

Revitalising consensus on policies among political parties and the public requires looking back, underlining the good the policy has achieved, but also looking forward, devising new ways of making trade policies more inclusive and equitable.

Given that Namibia finds itself at a crossroads, managing its external and fiscal issues will be essential in figuring out its future economic course and enhancing its standing in the global economy.

Although the road ahead is full of obstacles, Moody’s upgrade offers some hope and is evidence of the potential benefits of significant fiscal discipline and economic reform.