• June 16th, 2019
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Calle not expected to ‘rock the boat’ with today’s national budget



WINDHOEK – Most economic analysts do not expect any major surprises from today’s tabling of the national budget by Finance Minister, Calle Schlettwein. 

While local economists would like to see a reduction of the budget deficit which is bursting at the seams, a decrease of the massive public service wage bill and lessening bailouts to over-dependent state-owned enterprises, the majority of those analysts spoken to do not expect Schlettwein to rock the boat, particularly during an election year.  
“It will be the case of ‘old wine in the new bottle’. Everything will stay the same except for the new date, a new cover page and the colour of the document,” commented Mally Likukela, Managing Director of Twilight Capital, adding that he expects no major surprises in terms of size or structure of the budget. 

“State revenue remained weak, while expenditure increased over the current fiscal year, thus the budget deficit will expand, contrary to the expected budget narrowing outcome. The tax burden is already heavy therefore there won’t be any further expansion to tax brackets other than the usual annual excise and levy revisions,” said Likukela. 
He added that the perpetual poor implementation of the budget remains the order of the day and expressed specific concern regarding little or no accountability for poor performance. 

“The expenditure part of the budget will continue to increase as government continues to cushion the population from the economic hardship, via increases in social sector spending. Government will firm up social safety nets also as a way of assuring and pleasing the electorate in view of the upcoming elections,” Likukela added.  

“Apart from repeating the political rhetoric of fiscal prudence and stabilisation, there won’t be any new measures to curb either excessive bailouts or streamlining the bulging civil service wage bill. There will be a clear abandonment from either NDP5 (National Development Plan 5) or the Harambee Prosperity Plan (HPP), as none of the projects under any of those programs will be given priority, let alone appraised,” Likukela opined. 

He concluded that today’s budget at best will best be described as a “fire extinguisher tool” as he feels the minister will have to focus on measures to rescue the struggling economy and for now will have to forget about the long-term development programs and projects as stipulated in both NDP5 or HPP.

Meanwhile, in a recent discussion with New Era, Klaus Schade, a research associate at the Economic Association of Namibia, said some of the crucial issues Schlettwein needs to address include the reduction of the wage bill and a review of the public sector. 

“Natural attrition does not address the real issue of a bloated civil service; trade unions demand salary increments for public sector employees and economic growth projections for 2019 do not indicate a reduction in the number of public servants,” said Schade. 

He added that Schlettwein will also have to tackle the state of public enterprises and fiscal risks concerning SOEs’ ability to repay debts and noted that even public enterprises that are currently regarded as doing well could come under financial pressure. 

“I expect some clarifications on policies, such as the proposed changes to the Income Tax Act that were announced a year ago but not yet implemented, and on other major policies that have been on the table for quite a while, such as NEEEF and NIPA,” said Schade. 

Overall, he expects the budget to be characterised by balancing demands during an election year with the continuation of fiscal consolidation and a clear prioritisation of expenditure on social and economic sectors. 
“We, therefore, might not see the decisions necessary to substantially lower the public debt-to-GDP ratio, which would require a lower than anticipated budget deficit. Hence the debt ratio is likely to increase over the next MTEF (Medium Term Expenditure Framework) period,” said Schade. 

However, he noted that it is unlikely that personnel expenditure will drop, since there is no concerted drive to reduce public sector employment and since the election year requires additional, temporary staff for the Electoral Commission. 
Schade also pointed out that according to the South African budget, Southern African Customs Union (SACU) transfers are higher than anticipated for this financial year, which could translate into additional revenue. 

“If that materialises it would bring a welcome relief and should be used to lower the deficit and increase capital expenditure. In contrast, income tax and VAT are expected to stagnate because of job losses and business closures, although the implementation of the ITAS should result in efficiency gains and increased compliance,” Schade concluded. 
 


Edgar Brandt
2019-03-27 09:04:10 2 months ago

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