Restarting the growth engines … Calle prescribes medicine for ailing economy
WINDHOEK – Finance Minister Calle Schlettwein yesterday presented a dossier of measures that government must take in order to, in his own words, restart the growth engines of the economy, which has been in recession for the last ten-quarters.
Coupled with commodity price crash, unforgiving persistent droughts and weak growth in neighbouring trading partners such as South Africa, the Namibian economy has been on its knees since the middle of 2016, but Schlettwein is not giving in.
Yesterday during his mid-year budget review and medium-term policy statement, he presented a package of measures to be taken to not only keep the economy above the stormy economic seas but to realise growth too.
The package entails prioritising and scaling-up spending on pro-growth programs, deploying ring-fenced project financing with limited but targeted debt commitment on competitive terms, addressing constraints on private sector development and unlocking private capital, and addressing bottlenecks in the central procurement, both for procuring units and the Central Procurement Board.
It further entails improving competitiveness of the Namibian economy and implementing structural reforms to enhance business climate, eliminating potential corruption and over-pricing in public procurement, strengthening allocative efficiency to ensure that critical service delivery is not impaired due to budget constraints, and improving efficiency of the operations of public enterprises.
What does this mid-year budget review offer?
“Namibian public finance currently faces a triple challenge,” exclamated a worried but confident Schlettwein.
“A prolonged consolidation period has reduced economic growth, leading to job losses, declining consumption related to public spending in real terms. To return to positive growth, the economy needs to be stimulated to enhance investment, consumption, exports and productive capacity,” he told fellow MPs in the National Assembly.
“Ultimately job creation with fair remuneration, the elimination of poverty and significantly improved equality must remain the main goals of economic and social development.”
He believed improved public spending, supported by better revenues and fiscal buffers would be needed to bring about such countercyclical intervention.
He was quick to warn, though, that with public finances limping, government alone lacks full capacity stimuli growth as outlined in his package.
“The revenue projections will not allow us to make significant increases in public expenditure; create large financial buffers; and, take up more debt,” he said.
Namibia’s public debt currently stands 43 percent of GDP.
“Taking on more debt is unsustainable,” the minister was quick to warn.
He is not planning to raise state revenue through aggressive and punitive tax increases against locals either. With furhher borrowing and punitive taxes not optional, prospects for increased public spending in the short to medium-terms are limited.
To contain the freefall, the mid-year budget review and its medium-term policy framework therefore retains policy consistency with the macro-fiscal framework announced in the 2018/19 budget, the minister said.
Resources will be reallocated to address priority needs, mainly in the social sectors to enable uninterrupted provision of basic public services and social safety nets.
With deep budget cuts already being felt in many sectors, Schlettwein again confirmed yesterday that he would continue to maintain the gradual fiscal consolidation policy stance over the next MTEF.
He promised to leverage private capital for enhanced infrastructure development, and seek to partially compensate losses in SACU revenue with improved domestic revenue,
“[We] propose frontloading actions and policies which would promote growth, job creation, private sector partnerships and unlocking domestic savings to finance local investment opportunities, while limiting further public debt increases,” he said.
The South African economy, which is the destination of about 14 percent of Namibia’s merchandise exports, recently entered a technical recession, affecting Namibian exports adversely.
“For Angola, the sub-region’s third largest economy and an equally key trading partner for Namibia, an annualised contraction of about 0.1 percent is projected for this year, after a decline by 2.5 percent in 2017, with a rebound to positive territory of 3.1 percent next year,” the minister warned.
2018-10-25 09:08:10 6 months ago