Edgar Brandt
Windhoek
Namibia’s reliance on its annual share of Southern African Customs Union (SACU) receipts is not a problem, but the volatility of this important revenue stream for government is a great cause for concern, the International Monetary Fund (IMF) said this week.
Namibia is a member of the five-nation customs union SACU, which is the oldest functioning customs union in the world. Namibia relies heavily on revenue from SACU and 30 percent of the 2017/18 national budget is expected to come from SACU receipts alone.
The SACU Council of Ministers last week determined, according to the revenue sharing formula for member states, that Namibia would receive more than N$17 billion from SACU in the 2018/19 financial year. This was after SACU informed the government that it had been overpaid for previous SACU receipts and therefore has to repay about N$3 billion.
Other SACU members will receive N$19.4 billion (Botswana), N$5.5 billion (Lesotho), N$43 billion (South Africa) and N$5.8 billion (Swaziland).
“Being integrated in SACU now has a direct bearing on our fortunes. This is one of the consequences of our economic integration,” Minister of Finance, Calle Schlettwein, said on Tuesday during a joint media briefing with the IMF.
According to the leader of a visiting team of the IMF, which was in the country this week to conclude the IMF’s Article IV mission, Geremia Palomba, declining SACU revenue for Namibia calls for significant fiscal adjustment to ensure debt sustainability and macroeconomic stability.
“Policies need to address the sources of recent deterioration, including public wage costs, and combine expenditure and revenue measures that can support long-term growth, while safeguarding critical social and development spending. Strengthening revenue administration, improving budget formulation and expenditure controls, and carefully managing extra-budgetary entities and public enterprises, are critical steps to consolidate the fiscal accounts and secure a more equitable burden sharing,” said Palomba.
“Avoiding risk-taking from off-budget operations is also essential to the credibility of the adjustment. To this end, the mission welcomes the authority’s commitment to undertake additional measures to reduce the fiscal deficit, as stated in the recent Mid-Year Policy Statement,” added Palomba.
The Bank of Namibia’s recently released money and banking statistics for October 2017 attributed the recent rise in Namibia’s foreign reserves mainly to inflows from SACU receipts.
SACU’s revenue sharing formula, which was implemented for the first time in 2004 to calculate revenue shares for member states, has three components, namely customs, excise and development.
The customs share is allocated on the basis of each country’s share of intra-SACU imports.
The excise component is allocated on the basis of each country’s share of gross domestic product (GDP).
The development component, which is fixed at 15 percent of total excise revenue, is distributed according to the inverse of each country’s GDP per capita.
The percentage share of revenue shares distributed for SACU member countries in 2016/2017 was 20 percent for Botswana, 6 percent for Lesotho, 18 percent for Namibia, 50 percent for South Africa and 7 percent for Swaziland.
Caption
Finance minister Calle Schlettwein