By: Nghiinomenwa-vali Erastus
The gap (budget deficit) between the government’s planned expenditure and its expected revenue for the 2026 Financial Year is expected to widen from N$12.8 billion to N$15.8 billion.
As a result, together with other financial commitments made by the government, the amount of money to be borrowed this financial year will increase from N$29.8 billion to N$33.6 billion. This is to fund the national budget of N$106.1 billion for the FY2025/26, catering to the government’s growing operational needs.
This is according to the Mid-Year Budget Review (MYBR) 2025/26 Borrowing Strategy summary released by the Bank of Namibia (BoN), which borrows on behalf of the government.
The Ministry of Finance explained that the need to borrow more is based on the projected decline in revenue, as diamond sales taper, VAT receipts decline, and income tax collections come in lower than anticipated. They added that the fiscal position has been hamstrung by these deteriorating conditions, with year-to-date revenue collection slowing by 10 percentage points relative to FY2024/25.
The MYBR borrowing plan has also been pushed up by other expenditure matters, such as VAT refund repayments, which show that these refunds had accumulated in the oil and gas sector, amounting to N$800 million.
Given limited options to fund the gap, the government borrows to fund the shortfall. In its policy, the government opts to borrow more from domestic sources.
The Sovereign Debt Management Strategy recommends that approximately 80% of the government’s funding requirements be raised from the domestic market, with the remaining 20% being from international markets
As a result, the domestic issuance for the financial year has increased from the planned N$21.1 billion at the beginning of the fiscal year to the current N$26.3 billion.
A net issuance of N$17.3 billion was targeted to be raised from the domestic market by the end of October 2025. The issuance comprised N$3.9 billion (treasury bills), N$11.8 billion (fixed-rate bonds), and N$1.6 billion inflation-linked bonds.
According to BoN, the demand for government debts during the auctions “remained sufficient as no shortfall in the overall borrowing was observed”.
In line with the Borrowing Strategy, two new inflation-linked bonds were introduced during the first half of the fiscal year, namely the GI31 and GI41. BoN states that the two bonds were issued to diversify the securities offerings in the market and support the government’s overall borrowing plan.
The Bank indicated that the two linkers were positively received by the market.
“These securities were well received by the market, with both instruments recording average bid-to-offer ratios of over 3 times at recent auctions,” BoN stated.
To date, a total of N$288.0 million and N$211.0 million have been raised on the GI31 and GI41, respectively.
With the adjustments to the financing requirement, N$9.0 billion is targeted to be raised between November 2025 and March 2026.
Additionally, BoN has stated that the government will continue to provide investors in the GC26 with the option of switching their investments to other long-term bonds throughout the remainder of the fiscal year.
The switch would enable the government to keep investors’ money instead of returning it once it matures through the running bonds.
The central bank is also expected to commence the GC27 switch auctions towards the end of the fiscal year.
“This remains an appropriate strategy for the government as it aims to ease the funding burden at the point of redemption,” explained the central bank.
