WINDHOEK- While yesterday’s tabling of the national budget of just over N$60 billion for the 2019/20 financial year saw the development portion allocation increased by 42 percent, to N$7.9 billion from N$5.5 billion, local economists’ first impressions are that the budget contained no major surprises.
However, Finance Minister Calle Schlettwein was adamant that this budget places greater emphasis on economic growth, enhancing infrastructure investment and crowding in private sector participation.
During his 36-page budget speech in Parliament, Schlettwein said the 2019/2020 budget reduces the proportion of non-core expenditure to curb wastage and enhance allocative efficiency, provides increasing budgetary allocations to social sectors to guard against reversals and enhances access to affordable and reliable public services, and further strengthens allocations to social safety nets to improve coverage of beneficiaries and maintaining the grants in real terms.
“This budget sets out the developmental outcomes we aspire to achieve this year and beyond, and securing a new pattern of sustainable economic growth that is broadly shared by all Namibians. As masters of our own destiny, this budget summons the collective energy of all Namibians; and, implementing offices, ministries and agencies to rally together for broad-based economic growth activities, timely and efficient implementation of funded programs, and taking the steps required to implement the complementary reforms designed to deliver improved developmental outcomes,” said Schlettwein.
Nevertheless, Mally Likukela, Managing Director of Twighlight Capital, commented: “There is nothing new in this budget and it is basically the same as last year. What is interesting is that there was no mention of Vision 2030, the Fifth National Development Plan or the Harambee Prosperity Plan.”
Likukela further lamented that the budget does not speak to the country’s industrialisation efforts and said it could be construed as discouraging in terms of tax amendments.
He was referring to the 10 percent dividend tax and the scrapping of the Export Processing Zone (EPZ) regime.
“The EPZ regime brought in N$11 billion for government and it is quite a contradictory agenda for industrialisation to do away with this regime,” said Likukela.
He shared the same sentiment in terms of export levies, a situation he reiterated does not speak to industrialisation.
On the proposed increase of the fuel levy by 25 cents per litre for all levied fuel products, Likukela feels government is trying to fill its revenue pot at the expense of businesses.
But, during his speech, Schlettwein stressed that this budget is targeted at stimulating economic growth and bringing about decent jobs and, further adjusting the public fiscal stance to sustainable and stable levels.
“In pursuit of these material policy objectives, we remain agile to guard against excess reversals on gains in the social sectors. The budget I lay before you is thus as much about ensuring macroeconomic stability as it is about supporting economic recovery with jobs,” said Schlettwein.
He stipulated that the 2019/2020 budget provides and reinforces the three-linked and interconnected fiscal policy actions, namely providing for a growth stimulus package, a continued reduction in the budget deficit, and the timely implementation structural policy reforms through improved ease of doing business, business confidence and increased policy certainty.
Providing his first impressions on yesterday’s budget, Klaus Schade from the Economic Association of Namibia said this time around government is much more realistic concerning the budget deficit and the debt to GDP ratio.
Yesterday Schlettwein confirmed that the budget deficit is estimated at N$8.2 billion or 4.1 percent of GDP and averaging 3.4 percent over the Medium Term Expenditure Framework (MTEF), compared to 4.4 percent in FY2018/19.
Schlettwein emphasised that faster reduction in the budget deficit would require deep expenditure cuts, that would hurt both growth and service delivery,
He explained that the deficit would be financed through a combination of domestic, multilateral and bilateral borrowing, while the leveraging of state assets in the telecommunication sector is expected to ease financing obligations and mitigate against increases in the debt stock.
“Taking into account the total financing requirements, the debt stock is estimated at N$96.3 billion, 46.3 percent of GDP and 50.8 percent over the MTEF and peaking at 52.3 percent by FY2021/22, with appreciable reduction in public debt expected by FY2021/22 when about N$8.6 billion of debt is expected to be redeemed,” Schlettwein added.
In response, Schade noted that the debt to GDP ratio would increase to over 50 percent at the end of the MTEF.
“Government tried to keep the balance between fiscal consolidation while at the same time providing stimulus to encourage GDP growth,” said Schade.
Overall, the proposed spending in the Appropriation Bill for FY2019/2020 sees the share of the social sector maintained at 49.3 percent of the budget and over the MTEF. This is N$29.6 billion in FY2019/20 or N$88.9 billion over the MTEF. Basic Education receives N$13.8 billion, and N$ 41.4 billion over the MTEF, while Higher Education, Training and Innovation receives N$3.1 billion and about N$9.4 billion over the MTEF, of which N$911.9 million is for Unam, N$500 million for Nust and N$1.1 billion for NSFAF in the budget year and N$3.4 billion over the MTEF.
Meanwhile, Health and Social Services is allocated N$6.9 billion, 2.3 percent better than the previous year and about N$20.6 billion over the MTEF and Poverty Eradication and Social Welfare is allocated N$3.6 billion, 4.5 percent more than the previous year and approximately N$10.8 billion over the MTEF.
Also, the old-age pension is increased by N$50 to N$1 250.00 per month.