Abstract

This paper investigates macroeconomic determinants of the balance of payments in Namibia for the period 1999
to 2009. The investigation was conducted through cointegrated vector autoregression methods. The investigation
reveals that fiscal balance, GDP and interest rate are the main determinants of balance of payments in Namibia.
Increase in GDP and interest rate causes an improvement in the balance of payments. The positive effect of GDP
on balance of payments suggests that expansion of export has a positive impact on current account and the
overall balance of payments. More increased export potential through the development of new products and
services should be encouraged. The positive impact of interest rate on balance of payments suggests that interest
rate can be used as a policy tool to ensure favourable capital account and for improved balance of payments. An
improvement in the fiscal balance is also associated with an improvement in the balance of payments. This
implies that policymakers need to assess the forecast of SACU receipts in order to ensure readiness proactively
when these receipts decline to avoid a possible macroeconomic, fiscal and balance of payments instability.

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