Mid-year budget review – bridging the gap with debt

Home Business Mid-year budget review – bridging the gap with debt

by Staff Reporter

When Finance Minister Calle Schlettwein reviewed the national budget last week he noted that revenue declined from a budgeted N$58.4 billion to N$N$54.87 billion on the back of a Southern African Customs Union (SACU) revenue shortfall.

“What is concerning is that a further decrease of 24 percent is anticipated over the 2016/17 financial year due to weak inter SACU trade,” said Namene Kalili, Senior Manager for Research and Development at FNB Namibia.
In his report on the mid-year budget review, Kalili remarked that an Export Levy Bill is in the pipeline to support local value addition of resources, along with the legislation on environmental taxes during the current fiscal year. “Looking forward, the introduction of a progressive solidarity tax on individuals and business will redistribute N$600 million to households living below the poverty line,” he noted.

Kalili further commented that the 2015/16 budget provided for a N$67.08 billion expenditure, however, the minister has reduced this by an impressive N$4 billion in savings based on aggressive spending cuts on non-core recurrent expenditure, public sector wage bill management reforms and postponement of non-productive capital expenditure.

The budget balance is now expected to come in at 6.8 percent of gross domestic product if current expenditure is utilised.

“The initially budgeted 34.4 percent increase in public debt from N$35.95 billion to N$48.30 billion has edged up even higher. Government debt stock is expected to rise to N$50.8 billion, funded 70 percent domestically and 30 percent internationally,” said Kalili.

“On the economic front the minister seems to be sticking to his current convictions with no mention of Kudu gas during his budget speech. He however stated that engagements will continue with the private sector to develop alternative energy sources in solar, wind and diesel power generation, while further strengthening NamPower’s balance sheet for the development and maintenance of national energy generation and transmission capacity,” Kalili noted.

He continued that projects that would be of interest to the private sector include funding for infrastructure development, especially the rehabilitation of the railway infrastructure to facilitate cargo transport from the major mining and manufacturing operations in the north-central areas to Walvis Bay port; funding of the industrial upgrading programme for agro-processing and irrigation farming; funding the road sector through targeted project financing budget support to develop major roads infrastructure, in addition to financing provided through the road user charges administered by the Road Fund Administration over the same calendar; and the scale-up of allocations to mass land serving and the mass housing programme over the next Medium Term Expenditure Framework (MTEF) for accelerated delivery of affordable serviced land.

The government’s strategy has additionally taken a more pragmatic stance with the listing of certain interventions over the MTEF period, such as the scaling up of funding to top NDP4 areas of logistics, agriculture, manufacturing and tourism and crowding in private sector investment through implementation of a reviewed fiscal incentive regime and diversification of sources of funding through leveraging PPPs and encouraging partial listing of some of the SOEs on the Namibia Stock Exchange.

Schlettwein also mentioned that more funding would be provided to support free secondary education and scale-up allocation to the Student Financial Assistance Fund over the MTEF, and assess the modalities for transforming the fund from a loan-based to scholarship grant fund.

An additional N$500 million was allocated to the prime minister’s office to support the drought relief effort; while a further N$400m was allocated to the agriculture ministry to fight foot-and-mouth disease.

“On a policy perspective the much anticipated Public Procurement Bill is expected to come into effect next year, while the Public Private Partnership Bill was submitted for legal scrutiny and drafting. The minister highlighted the need to revise the domestic asset requirement upwards under Regulation 28, 29 and 15 in order to increase local market liquidity,” said Kalili.