It’s been a year since Minister Calle Schlettwein
last presented his Budget Statement to parliament, and what a year it has been.
The economy had taken blow after blow – first from the commodity price crash,
then the effects of the drought, then from the global economy struggling in
light of political upheaval in advanced economies… the list goes on.
It should then be no surprise that the
Namibian economy found itself struggling this year. By now, the estimate for
2016’s growth has dropped to only 1%, with growth for 2017 being revised
downwards to 2.5%. As a result, Namibia found itself not only facing a slowing
economy, but with sliding confidence, also a lack of liquidity. It is in this
climate that Minister Schlettwein had to prepare and present his Budget
Statement for the next year. So let’s take a look at what he presented:
Let’s start at the top, with government
revenues. In total, the government expects to receive about N$ 56.4 billion from
various sources, down from N$ 57 billion last year (later reduced to N$ 51.5
billion by mid-year), reflecting Namibia’s difficult situation. N$ 53.3 billion
will be from taxes, with N$ 19.2 billion from income taxes – as paid by us
every year, and paid by the various companies operating in Namibia. Another N$ 34.1
billion is collected via indirect taxes, like VAT, that you pay when purchasing
products or importing products, and transfer duties and property taxes. Then an
additional N$ 2.6 billion is raised from other sources, such as dividends and
profit shares from government investments and interest of loans and investments,
royalties on minerals mined, and fines and administration fees.
So far, so good. It seems quite prudent,
given the state of the economy, and it seems the government is not making the
mistake of over-estimating its revenues again, and having to adjust it as they
did during last year. So, let us take a look at the expenditure now. Minister
Schlettwein’s budget indicates that the government intends to spend N$ 62.5
billion this year. How is this allocated?
As usual, the biggest expense is the N$
12.0 billion is budgeted for Basic Education. It has been noted that education
is the greatest equaliser, and the Namibian government is certainly striving
toward it, as government spending on education dwarfs other spending by a
significant amount. In fact, Namibia is one of only three countries in the
world where education is the top spending priority for government. An
additional N$ 3.1 billion is budgeted for Higher Education, Training and Innovation.
Health and Social Services receive N$ 6.4 billion
in the budget, and N$ 3.3 billion goes to the Ministry of Poverty Eradication
and Social Welfare. The budget increases
the old age pension grant to N$ 1 200 per month, allowing our oldest and most
vulnerable of citizens to be placed above the national poverty line. The
Ministry of Defense and the Ministry of Safety and Security receive N$ 5.6
billion and N$ 5.0 billion respectively. Together, the abovementioned
ministries receive more than 50% of the budget.
The rest of the ministries are funded by
the remainder, as well as several infrastructure development programme, which
inter alia include the rehabilitation of the national railway, the on-going
expansion of the Port of Walvis Bay, several national roads water and storage
infrastructure, the Mass Land Serving Programme and increased funding to the
Public Financial Institutions for private sector support and SME development.
As you may have noticed, our government
expenditures exceed our revenue – this is what is called our budget deficit.
This year, however, it only amounts to 3.6% of GDP, in contrast to the 6.3% of
last year. This is due to the fiscal consolidation stance taken by the Ministry
of Finance to maintain our macroeconomic stability and sovereign credit rating
of our bonds. As a result of the prudent budgeting, only N$ 6.1 billion worth
of debt funding will have to be raised by government this year.
This was achieved by reducing unproductive
capital spend and non-core recurrent spending, while refocusing expenditures to
national development priorities. This enabled government to cap our national
debt at 42%, which otherwise would have ballooned to 46%, and put pressure on
our finances via debt servicing costs, as well as jeopardised our credit
rating, which was already downgraded to outlook negative last year.
With the economy just starting to rebound,
and only expected to recover to 2.5%, policies to improve domestic resilience,
economic and market diversification, regional integration and national
competitiveness are of primary importance for Namibia, especially in the light
of several large completion projects that has reduced our investment rates to
more realistic levels.
The coming year will be an unconventional
one. In contrast to the previous decades, the geopolitical shifts towards protectionist
policies and away from multilateralism and globalization could slow global
growth and trade. Namibia’s inflation has just reached new highs, while our
currency has strengthened again after weakening last year. This indicates that
we might experience trade problems going forward, especially if the commodity
price recovery does not continue as envisaged.
This budget, at least, should give some
reassurance that the government is keeping its eye on the ball, and positioning
itself against adverse conditions, while simultaneously attempting to put the
country on the right footing for rapid growth should the opportunity present
itself. Still, this quick summary is no replacement for your own – every
citizen should avail themselves of the documents as presented on the Ministry
of Finance website, and make their own assessment. It is our duty to keep the
government accountable and transparent. Namibia expects every man and woman to
do his/her duty.
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