Windhoek
Finance Minister Calle Schlettein, joined by Minister of Economic Planning Tom Alweendo and economic advisor to the president Dr John Steytler, yesterday assured the markets that government will waste no time to implement corrective measures in a timely and targeted manner, but said such measures should not impede on the country’s economic growth.
The announcement was made in response to an report by international rating agency, Fitch Ratings, who last week revised the country’s economic outlook from “stable” to “negative”.
Alweendo echoed Schlettwein’s sentiment and used the analogy of a hospital patient, saying: “We need to prescribe some medicine for the patient, but we need to be careful not to overdose the patient to the extent that the economy will not grow.”
Namibia has since 2005 subscribed to Fitch Ratings and since 2011 to Moody’s Investors Service for independent credit ratings assessments to annually assess the country’s credit worthiness.
The country also undergoes an Annual Surveillance Assessment by the International Monetary Fund.
“Going forward, the government will reinforce its time-tested approach to responsible public finance management, pro-growth fiscal sustainability and macro-economic stability in the Mid-Year Budget Review for 2016 and for the next MTEF (Medium Term Expenditure Framework).
“With the subdued outlook on economic growth and revenue, the emphasis on the policy response action will be on the expenditure side to ensure that we live within our means, doing more with less and improving the quality of spending, without relenting on initiatives to improve revenue performance,” said Schlettwein.
Responding to a question by New Era, Dr Steytler reassured the country that there is no probability that the country will default on its debt obligations.
“If there was any probability of us defaulting on our debt then they (Fitch) would have downgraded us,” he said.
One of the factors on which Fitch based its revision was the increase in government debt stock to 38.2 percent of Gross Domestic Product (GDP), which is above the government target of 35 percent, which is forecast to rise to 39 percent of GDP by the end of 2016.
The assessment and the ratings opinion is based on objective information provided by government and other stakeholders and reflects the broader macro-fiscal policy actions needed to manage identified risks in the domestic economy.
“The risk factors emphasised in the ratings report are known to government and the current MTEF provides a basis for containing these risks. We stand ready to take the necessary steps at a faster pace than contemplated in the current MTEF budgetary framework,” said Schlettwein.
Short- to Medium-Term
Policy Response
The finance minister said the necessary expenditure re-alignment would be undertaken to place public finances on a sustainable trajectory, without significantly jeopardising economic growth and the effect of fiscal policy on socio-economic development.
He added that an analysis of the 2016/17 budget and MTEF is currently underway, with specific emphasis on spending cuts, including the freezing and suspension of funds for new recruitment in the civil service.
This will have to be done without hampering opportunities, particularly for school graduates, it was noted.
“Let me also emphasise that the domestic financial services sectors is key to addressing domestic financing and infrastructure development needs through direct investment and public private partnership arrangements.
“In this regard, mutual consultation with the financial services industry has commenced on the specific areas to address the needs of the economy during this adjustment period and going forward,” Schlettwein explained.