Public Debt Dynamics and Fiscal Sustainability in Namibia: An Intertemporal Budget Constraint Analysis

Abstract

The paper examines Namibia’s salient issues of public debt-dynamics and fiscal sustainability from 1980 to 2018. Time series data for the same study period was used. Of interest is the aspect of demystifying the dearth surrounding the trend of increasing public debt in Namibia when it is economically concerning that the existing capacity to mobilize needed resources is inadequate. The inter-temporal budget constraints model was used to examine the various fiscal reaction functions, debt dynamics and fiscal policy adjustment to debt. The study found that the inter-temporal budget constraint does not hold for Namibia. This is for the period under review, confirming that no surplus exists or somewhat too little to offset the accumulated debt from the previous period. The fiscal reaction functions are consistent with the inter-temporal budget constraint with resounding results for both fiscal reaction and extended fiscal reaction functions. The debt dynamics function exposition is that in the short-run, Namibia’s public debt is unsustainable. The government can address debt and fiscal sustainability issues by adjusting its expenditure through resources-wise matching. While government expenditure-containment amidst a global down turn could be complicated there is scope to design workable approaches for generating needed revenues while seeking to balance up expenditure concerns.