2017-08-15Staff Report 2 Edgar Brandt Windhoek-A rather diplomatic Finance Minister Calle Schlettwein yesterday stopped short of urging government to close down entities that are so constrained financially that they cannot even pay salaries, yet are allowed to exist. “Public entities must have the ability to pay their own salaries. They cannot come to the Ministry of Finance when they are technically insolvent and ask for one to two billion [Namibia dollars] for operational expenditures. There must be a better way to manage commercial public entities to turn a profit,” Schlettwein said. Government needs to closely look at spending on such entities, he said, as they continue to suck the national coffers dry. The minister made the statement yesterday when addressing the recent downgrade by Moody’s Investor Services of Namibia’s international credit rating to sub-investment grade. The downgrade essentially put Namibia’s international bond issuances in the sub-investment category, or what is commonly referred to as “junk status”. The comments come at a time that Cabinet is considering the fate of the Roads Contractor Company, a state-owned construction company that is unable to pay the salaries of its staff, as well as that of the national rail and freight company, TransNamib. Many state-owned companies still rely on handouts from Treasury to survive, a situation that is currently untenable, given the economic challenges facing the country. While Schlettwein refuted many of the factors cited in Moody’s downgrade. He said government must move away from non-essential expenditure to spending only on the essentials. However, the finance minister stood firm in his view that the Namibian economy is now in a better position than in December 2016. “The [domestic economic] situation has not deteriorated and therefore we question the rating,” he said. He further said the process followed by Moody’s was not systematic, as government is developing the mid-year budget review, which he said would provide for better informed ratings action and a more effective country assessment would have benefited from the review due in October 2017. Also, new policy instruments, such as public-private partnerships and the Namibian Industrialisation Development Agency, as well as the ongoing public enterprises reforms support the fiscal consolidation efforts of government and will help put the economy back on a higher growth trajectory, as well as addressing the structural challenges of economic reliance on imported commodities, high unemployment and poverty. Schlettwein was also adamant that no additional borrowing has been incurred to pay for the outstanding invoices (to date N$1.7 billion worth of outstanding invoices have been paid) and said the funds paid were from government’s cash reserves and budgeted funds. “All borrowings undertaken this year are in line with the expectations in the budget and therefore the statement from Moody’s that there are ‘sizeable fiscal imbalances and an increase in debt burden’ does not hold,” he said. With regard to Moody’s assertion that Namibia’s fiscal strength has eroded due to sizeable fiscal imbalances and an increasing debt burden, Schlettwein said a review of the country’s rating only four months into the budget implementation for 2017/18 financial year is somewhat premature and therefore relies on a very narrow base, and may in fact contain speculative conclusions on the performance of the budget for the whole financial year. He added that the latest records from the fiscus indicate a current debt level of 41.9 percent, which is within the threshold of 42 percent for middle-income countries the size of Namibia to be considered sustainable. “The debt level of 43 percent is, therefore, overstated by Moody’s. Moreover, Namibia’s overall voluntary debt ceiling of 35 percent of GDP has been conservative and is well within the SADC convergence threshold of 60 percent of GDP,” the finance minister pointed out. 2017-08-15Staff Report 2
