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Home / ‘Pro-poor’ spending…Shiimi splurges on vulnerable in mid-term budget

‘Pro-poor’ spending…Shiimi splurges on vulnerable in mid-term budget

2022-10-26  Maihapa Ndjavera

‘Pro-poor’ spending…Shiimi splurges on vulnerable in mid-term budget

Much to the expectations of local analysts, finance minister Iipumbu Shiimi yesterday tabled a 2022/23 mid-term budget review that reflects a resource allocation that is both pro-poor and sustainable. 

This mid-year assessment for the current financial year, Shiimi said, in many respects indicates improving fiscal fundamentals attributed to positive economic growth prospects and strong revenue mobilisation. 

Notably, this mid-year budget review, which provides a review of budget execution and available resources to enhance fiscal sustainability, was presented against a backdrop of significant negative developments in the global and regional economy, which has resulted in an extremely challenging domestic macroeconomic environment. “I believe we can only go far if we work together to safeguard and retain our fiscal sovereignty. I am of the conviction that we are gradually walking the right path - towards building a more resilient and prosperous Namibian House,” said an optimistic finance minister. 

With regards to fiscal totals, the medium-term framework increased expected revenue for the current financial year upwards by N$4.4 billion, from N$59.7 billion to N$64.1 billion. This represents some 7.9% year-on-year growth in revenue from the previous year.  Over the medium-term expenditure framework (MTEF), domestic revenue is forecast to grow by an average of 7.4% to reach about N$78.3 billion by the 2025/26 financial year. 

According to Shiimi, the positive adjustments in revenue reflect strong




collections for the year-to-date, mainly from income tax on individuals, corporate tax on both diamond mining companies as well as non-mining companies, value added tax and dividends from entities
such as Debmarine Namibia. 

Then, just as the domestic economy was showing recovery signs from the impact of the Covid-19 pandemic, substantial external shocks emerged, including the negative spillovers from the conflict in Ukraine as well as high global inflation,which
triggered tight financial conditions. 

Said Shiimi: “It is important to adopt a responsive macro-fiscal policy framework, both to safeguard the most vulnerable members of our society and to chart the pathway from this precarious economic and fiscal environment”. 

Despite this challenging environment, short-term growth prospects for the domestic economy have not reduced, despite a convergence of these adverse global factors, including high inflation and interest rates, supply chain disruptions, wage pressures as well as a weaker exchange rate.  “In this regard, the Namibian economy is expected to grow by 2.8% in 2022, before expanding further by 3.4% in 2023. This is a marginal revision from the forecasts in the main budget of 2.9% for 2022 and 3.7% in 2023. The revision considers updated information from industrial surveys, especially output from the mining sector and year-to-date performance,” Shiimi noted.  He added that this projected growth in 2022 is expected to be anchored by output from primary industries and
tertiary industries on the back of a strong recovery in mining activities, supported by a buoyant performance in the diamond sub-sector and a return to growth for most of the tertiary industries. 

Shiimi identified elevated domestic economic risks to emanate from the lingering effects of the pandemic, and which
he expects to be further compromised by the economic consequences of the conflict in Ukraine, as well as elevated global inflation. 

Moreover, in line with the fiscal sustainability consideration, he observed that aggregate expenditure over the next MTEF is projected to increase gradually, but at a slower pace than revenue. In fact, expenditure is projected to grow by 2.4% on average over the MTEF to reach N$80 billion in the 2025/26 financial year. This expenditure projection takes into account expenditure ceilings on the agreed 3% general salary and benefits’ adjustments for civil servants, as well as protecting the most vulnerable against escalating food prices. 

For this, N$5.2 million has been included in the budget of the social welfare ministry to increase the monthly Conditional Income Grant (CIG) for former food bank recipients from N$500 to N$600, effective this month. In addition, funding of N$97 million has been incorporated to increase the Disability Grant for beneficiaries under the age of 18 from N$250 to N$1 300 from the next financial year. 

Cognisant of the cost-of-living pressures,
a further provision has been made to increase the monthly old age grant and the disability grant as well as the orphan and vulnerable children grant by N$100, effective from the start of the next financial year.  In terms of debt, the budget deficit is projected to decline to about 5.3% of GDP during this financial year, compared to 5.6% estimated in the main budget. Shiimi tabled a N$61.5 billion budget for the 2022/23 financial year that indicated a total revenue projection of N$59.7 billion in February 2022. Over the MTEF, the deficit is projected to average about 2.4% of GDP. 

“In our estimates, we aim to realise a positive primary budget balance in the coming financial year FY2023/24 and maintain it over the medium-term,  thereby setting the public debt metrics on a downward trajectory,” he stated, adding
that the public debt stock is expected to increase to N$138.4 billion, equivalent to 69.6% of GDP during the current financial year.  


First impressions

Making his first impressions on Shiimi’s
mid-term budget review, Popular Democratic Movement (PDM) parliamentarian Nico Smit said it is clear the domestic economy is still struggling, with no real light at the end of the tunnel. “The increasing of allowances is not worth mentioning. What can a person do with N$50 or N$100, more so if they will receive it in the next financial year?” asked Smit.  Spewing his frustrations, senior lecturer at the University of Namibia Omu Kakujaha-Matundu said many expectations were not addressed by the finance minister in his remarks. 

“One was expecting to hear what the minister could do for the poor, who are reeling under the current cost of living crisis. What he could say is that we have zero-rated most basic foodstuffs for VAT, and there’s nothing more we can do for you. So, poor man, you are on your own. One of the many things we expected to hear is declining employment numbers,” the lecturer pointed out. Kakujaha-Matundu said to mention that the economy has rebounded, without telling how much employment was created, is of no use. He added that on economic stimulation measures, Shiimi’s speech was sketchy, full of rhetoric and empty on specifics. He further stated that the minister’s speech is more “pie in the sky” than real policies, which could have alleviated the pain of the unemployed and accelerated or rebooted the domestic economy. 

Meanwhile, the increase in safety nets (social grants) stood out in the mid-term review. “Though not so much of an increase, it is a good move”, said Lameck Odada, an economics lecturer at the Namibia University of Science and Technology (NUST).  He said the lack of a labour force survey continues to make it impossible to use data on forecasting to deal with the extent of unemployment, and make much- needed decisions. “The skyrocketing debt calls for urgent attention through debt repayment restructuring. The minister is hard at work, and needs every Namibian’s support. He is in a very uncertain economic situation, but believes that Namibia will be able to overcome, maybe not immediately, but in the long run,” Odada reasoned.

Meanwhile, head of research at High Economic Intelligence, Salomo Hei, admitted that there is a flicker of hope in the economy that should be applauded. 

“The minister’s budget had no major shocks. Also, revenue collection is going well, and that’s why the minister emphasised fiscal sustainability, and not much on
fiscal liquidation,” he said.

According to Hei, the big news is that a national census is coming, which will guide many decision-making offices.

2022-10-26  Maihapa Ndjavera

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