By Dhiladhila Magazine · Issue 09

The budget names two doctrines that usually pull apart and claims to serve both. The join between them is a single assumption.

Every budget is a quiet argument about how an economy works. Namibia’s 2024/25 statement is unusually candid about its own: it is built around stimulating domestic demand while cultivating fiscal prudence, naming in one breath two doctrines that normally pull in opposite directions. The framing itself, set out in the budget review, is the interesting part.

Behind the figures sits a question of theory more than accountancy: whether a small, open economy can support demand and consolidate its debt in the same year, or whether one aim must eventually give way to the other.

Two doctrines in one document

On the demand side, the budget cuts taxes, raises welfare and lifts a development budget up 58.1 per cent to N$12.7 billion (about US$670 million), each of which pushes spending into the economy. On the prudence side, it holds the deficit to 3.2 per cent of output and guides the debt-to-GDP ratio down toward 60.1 per cent.

The first bundle is broadly Keynesian – use the state’s balance sheet to keep demand alive. The second is the language of a debt anchor – keep borrowing inside a fixed bound. Most budgets lean one way; this one asserts that both can be served without contradiction.

The budget does not choose between stimulus and restraint; it claims to run both at once.

The anchor and whether it binds

The implicit rule is a debt-to-GDP path held close to 60 per cent, near the convergence benchmarks that regional peers use as a ceiling. An anchor of that kind is only meaningful if it constrains the budgets that follow, not merely the one that announces it. A target named once is easy; a target defended for a decade is a discipline.

That is where the framework meets politics. A debt rule holds only when a government is willing to accept the unpopularity of holding it – trimming a wage bill or delaying a project to stay inside the line. Until that resolve is tested, the anchor is a statement of intent rather than a binding constraint.

A debt anchor is a promise about future behaviour, and promises are cheaper than the choices that keep them.

Tax cuts as a supply-side wager

The corporate side of the budget rests on a different theory again. Cutting the non-mining company rate from 32 toward 31 and then 30 per cent, allowing losses to be carried forward for five years, and offering fresh incentives are supply-side moves: lower the rate, and investment and the taxable base are meant to grow to compensate.

It is a coherent idea, but a contested one even in principle. Whether a lighter rate today produces enough extra activity to replace the revenue given up depends on how firms actually respond, and that response is assumed rather than known. The budget writes the optimistic version of the theory into its forecasts.

Lower rates paying for themselves is a respectable theory and an unproven one.

The assumption holding it all together

Trace each strand back and they meet at one point. Demand support, the falling debt ratio and the self-funding tax cut all depend on nominal growth running ahead of debt. That single assumption is the keystone; remove it and the arch does not sag so much as fall.

This is the framework’s honest weakness. It is not internally contradictory – the doctrines can coexist on paper – but they coexist only inside a growth forecast the government does not command. If growth underperforms, the budget will have to pick the doctrine it meant all along.

Two doctrines share one keystone: growth. Lose it, and the budget must finally choose.

For an economist, an analyst or a strategist reading past the headline numbers, the 2024/25 budget is a clean test of a proposition: that demand support and debt consolidation can be held together by growth. The decision it invites is whether to treat that reconciliation as a durable framework worth planning around, or as a one-year truce between doctrines that a weaker growth print would quickly end.

Sources: The Namibian; Namibia reduces corporate taxes and introduces new fiscal incentives (UNCTAD); Namibia 2024/25 Budget tax changes (Orbitax)