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Shiimi: Higher civil servants’ salaries will worsen deficit

2022-04-07  Maihapa Ndjavera

Shiimi: Higher civil servants’ salaries will worsen deficit

Finance minister Iipumbu Shiimi pointed out the contradiction of some parliamentarians lamenting the size of the budget deficit and consequently the increase in government debt, while still advocating for the increase in civil servants’ wages. 

The finance minister, therefore, warned that increasing civil servants’ salaries would escalate the wage bill, which would in turn worsen the deficit. This, he cautioned, would consequently make national debt unsustainable.

Shiimi said central government’s budget deficit is estimated to have reached its widest level during FY2021/22. But over the Medium-Term Expenditure Framework (MTEF), it is expected to narrow notably. When compared to the previous year, the central government deficit widened, rising from 8% of GDP in 2020/21. The widening of the deficit was mainly due to lower SACU receipts in the wake of the Covid-19 pandemic, coupled with a fall in company taxes.

The minister made these remarks during his reply on matters raised during the second reading of the 2022/23 Appropriation Bill and the 2022/23 Expenditure Framework in the National Assembly.

He also addressed the high unemployment rate in the country after fellow parliamentarians pointed out the need to create economic opportunities, specifically with the aim to reduce youth unemployment. 

“High unemployment has been with us for a considerable period. We need to recognise, however, that the decline in commodity prices in 2015, persistent droughts since then, and the devastations caused by Covid-19 have exacerbated the problem,” stated Shiimi. 

Furthermore, he pointed out that youth unemployment is not only unique to Namibia, but is a regional and continental challenge. Youth unemployment is estimated at about 40% in Namibia, 55% in South Africa, 46% in Eswatini, 35% in Lesotho and 36% in Botswana. 

He said even in countries with a relatively low youth unemployment, the level of under-employment among the youth could be as high as 70%, meaning a high percentage of the youth do odd jobs that do not fully occupy them.

Shiimi added that the high rate of unemployment can be explained by a number of factors, including the long-term impact of many years of deprivation and under- development during the colonial period, amongst others. 

Focusing on the structure of the economy, the minister stated that the Namibian economy is dominated by the extractive and service sectors. 

“The extractive sector is by nature a capital-intensive sector and is increasingly becoming more so, especially in diamond mining, where many mining activities are now taking place offshore. By implication, although this sector significantly contributes to the GDP of the country, it does not create enough jobs,” he outlined.

Thus, the solution to the unemployment problem largely lies in changing the structure of the Namibian economy with the view to creating more job opportunities for every Namibian, including the youth. 

He added: “Diversifying the economy is a difficult undertaking, which requires interventions from different angles. But I believe Namibia is moving in the right direction to grow and diversify the economy in a way that will create jobs for the youth. The implementation of the HHP2 plan will go a long way in addressing the unemployment problem, particularly youth unemployment”. 

2022-04-07  Maihapa Ndjavera

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