Source: News Online

Bank of Namibia Governor Johannes !Gawaxab has warned against the phenomenon that the rapid development of the oil and gas and green hydrogen industries in Namibia may lead to a decline in investments in other vital sectors such as agriculture, fishing and tourism.

While acknowledging the positive contributions of oil and gas exploration activities as well as green hydrogen investments to Namibia’s economic growth, !Gawaxab said this could have potential implications for monetary policy.

At a public conference yesterday in Lüderitz, he said that increased exports of natural resources could lead to an appreciation of the currency, which would subsequently encourage imports and discourage exports from other sectors, thus impacting their competitiveness.

He also highlighted the potential impact on Namibia’s current account deficit, citing a recent example where the deficit worsened to 15% in 2023 from 12.5% ​​in 2022, largely attributed to the intensification of exploration activities. and evaluation.

While a recovery to 12.6% is expected in 2024, !Gawaxab said there are projections of further deterioration to 14% in 2025 if left unchecked.

“These issues, if left unchecked, could potentially culminate in risks of a resource curse for Namibia or what is known as Dutch disease,” !Gawaxab said.

Dutch disease is often caused by uneven growth between sectors when resources such as oil are discovered, and by poor management of these resources, often associated with corruption.

This phenomenon, which originated in the 1960s when the Netherlands discovered gas reserves in the North Sea, caused non-oil sectors to become less competitive and unemployment increased from 1.1% to 5.1%. .

!Gawaxab listed Venezuela, Ghana, Nigeria and Angola as countries that suffered from Dutch disease, following oil discoveries in their countries, and gave credit to Norway and the United Arab Emirates as countries that turned their fortunes around.

!Gawaxab said to positively benefit from these resources, it is necessary to set a long-term goal for what Namibia looks like in the years to come.

“We need to ensure strong and competent institutions that are transparent and free of corruption,” said !Gawaxab.

He called for the implementation of other measures to prevent Namibia from falling victim to the curse, such as the establishment of stabilization funds, planning for future generations through initiatives such as the Welwitschia Sovereign Fund, diversification into other economic activities due to volatility and the depletion of oil resources. and promote the participation of local content in the industry value chain, together with appropriate monetary and fiscal policy frameworks that support macroeconomic stability.

Furthermore, !Gawaxab said that oil and gas discoveries and the anticipated green hydrogen industries are expected to change the socio-economic landscape of the city of Lüderitz and drive the need for the city council to make large tracts of land available for industrial and residential.

He said that as a significant initial measure, the council has formulated a strategy to expand the Lüderitz urban area, but recognized several obstacles that need to be addressed, including mining licenses impeding urban expansion, difficult topography, funding limitations and availability limited water.

“Lüderitz has a unique opportunity to be a leading economic center in Namibia and an example of prudent management of natural resources that benefits the people,” said !Gawaxab.

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