Edgar Brandt
Finance minister Iipumbu Shiimi yesterday tabled the 2021/22 mid-year budget, where he announced N$2.2 billion has been made available for reallocation.
This amount was allocated against total funding requests of N$7.1 billion received from various government entities.
Some of the major changes to the original budget also propose reducing the development budget ceiling on a net basis by N$279.8 million from N$5.5 billion to N$5.2 billion, increasing the non-interest operational budget by N$2.2 billion from N$53.9 billion to N$56.1 billion, and reducing statutory expenditure marginally from N$8.5 billion to N$8.3 billion.
Shiimi delivered his budget speech wearing a special green tie in keeping with the theme of ‘Green energy, green hydrogen’. Before commencing with the details of the reallocation, the finance minister played a video clip of President Hage Geingob speaking in Glasgow at COP26.
Shiimi confirmed the President will make a major announcement at the international conference for Namibia’s preferred bidder on the feasibility study for green hydrogen and related products, a major reason for the “green” themed budget speech.
Delving into the particulars of the budget review, Shiimi said: “This budget review deters foreseeable underspending on obligatory operational items while maintaining the provision of essential goods and services. At the same time, it entrenches allocative efficiency by reallocating resources to priority programmes where funding is required to achieve better outcomes”.
He added the review also preserves spending dedicated to combating the spread of Covid-19, noting there is consideration to gradually phase out such spending in the near term to maintain fiscal sustainability.
“The Medium Term Budget Policy Statement sets out the economic diversification plan and policy priorities which must be firmly implemented in the short- and medium-term. Accordingly, the private sector will be an important partner in pursuing this new modus operandi.
I, therefore, urge the business community to indulge us as we seek to engage in a dialogue to understand and subsequently resolve the ongoing binding constraints to productivity and growth in existing sectors,” he said.
Shiimi’s mid-term review exercise also focused on reallocating the realised resource envelope across critical expenditure items that he said could not be postponed to future financial years.
The reallocated amount constitutes N$41.4 million and N$279.8 million realised from suspensions on the operational budget and development budget, respectively.
These internal savings, said the finance minister, were obtained through a Treasury and National Planning Commission review.
Shiimi admitted the ideal situation would have been to utilise the additional revenue to reduce the budget deficit, but said the country is faced with projected shortfalls on personnel and other obligatory expenditure items that would otherwise result in overshoots and outstanding invoices.
To avert that outcome in the coming years, he said, Treasury aims to improve budget accuracy.
“From an economic fundamental perspective, our growth prospects were hamstrung by the downturn in commodity prices and persistent droughts, compounded by low productivity outside the mining and service sectors, and constrained diversification opportunities due to limited know-how and productive capacities in the economy. Going forward, the primary policy pillars over the MTEF will centre on reversing the tide of low growth through a micro-level exploration of potential complex economic activities for the private sector to expand into,” he said.
Meanwhile, Shiimi’s proposed reallocation lifts Namibia’s global expenditure ceiling for the financial year from N$67.9 billion to N$69.7 billion.
The proposed reallocations, he said, are primarily to address under-budgeting on personnel expenditure, utilities and other spending items across to meet resource shortfalls at health and social services as a result of the third wave of Covid-19.
Overall, the budget deficit will remain unchanged at 8.6%.
First reactions
“Good news: Revenue collection performed better than anticipated, achieving 52% of target for 2021/22”, was the reaction from local economist Klaus Schade.
He also lauded the US$500 million Eurobond redeemed, which noticeably created concern in the past and applauded fish auctioning, which raked in more than N$400 million.
He said this proves that auctioning is the way to go – not just for government development purposes but for all quotas.
This method, he suggested, should be extended to other natural resources as well.
“Policy announcements indicate that there is progress in PSEMAS reforms that need to be completed and implemented as a matter of urgency, since taxpayers (including those who don’t have medical aid) subsidise PSEMAS to the tune of N$2.3 billion annually. Stronger oversight on NSFAF is introduced, saving the fiscus already some N$40 million,” said Schade.
Of concern, he added, is the low execution rate of the development budget that stood at just 39%.
“Allocation to the development budget is further reduced by N$280 million, which limits the government’s efforts to stimulate the economy,” Schade noted.
Also weighing in, Mally Likukela, an economics lecturer, called this “a human-centric budget that recognises the need to further mitigate the impact of Covid-19 on the most hit and vulnerable group of our society”.
Likukela said redirecting funds for social grants “is a testimony that government contends that indeed there will be no inclusive prosperity without pulling in the most excluded of society and the last member of society”.
He is, however, concerned the budget is not “economically stimulating and unemployment sensitive”.
“The focus on pro-poor without material sustainability measures in place renders the fiscal stability a significant risk. The budget also neglects the risk of the middle class, who have to face the ever-rising cost of living, which has for a long time been suppressed by lower wages and no salary increment. A bit of support would have taken this group a long way to preserve and sustain their already overstretched incomes,” he said.
- ebrandt@nepc.com.na