WINDHOEK – The worst possible way to address the national economic malady that currently besets the Namibian nation, according to Finance Minister Calle Schlettwein’s healing prescriptions, would be for government to continue spending over budget on public projects.
It is not to say the finance minister has not heard the wailings of cash-squeezed Namibians and the mounting suggestions that a special public spending, or some special resources allocations, as a stimulus similar to 2011 economic intervention, may help jolt the economy to normality faster.
No. Actually, he “has noted with concern the growing expectations of more resources to be allocated.” However, as per the Schlettwein economic and financial gospel dictations, during these trying times, the best medicine is the opposite of spending – saving. “We are not going to get out of the hardship through additional spending but through additional saving,” he said.
He then evoked the analogy of a storm, likening it to the current economic problems, saying in a heavy storm people stays indoors and get out after it stopped, to assess and mend whatever damages or leakages caused by the storm to be better prepared for the next storm.
“We are now in a mending phase, the damage is not yet fully fixed,” he said to a gallery of media hacks and economic analysts on Monday this week. As of how long the mending phase would take, he says: “There are no quick fixes.”
But he reiterates of his understanding of how the economic downturn has “caused pain in the domestic economy… there are job losses and businesses have closed.” He vows that the country must focus its resources to mitigate further job losses.
“This should be the priority. We must focus where the pain is worse, fix what is causing damage that is irreparable on macroeconomic side,” he says. And, he emphasised again, the process of fixing the economy is not to be overburdened with too much debt that would cause the country loose its fiscal sovereignty.
Which begs the question of; how did the country get here in the first place? And by ‘here’ we mean where, according to the latest Bank of Namibia statistics for the first three months of 2018, fuel prices are at levels last experienced in 2014. New vehicles sales have reached an all time low since 2014 with about 3000 vehicles sold, valued at about N$3,5 billion compared to the first quarter of 2014 when Namibians dished out N$5 billion for 5 000 vehicles in the first three months of 2014.
In fact, it is estimated that between July and August 2014,when we were flush with cash, Namibians shelled out nearly N$6 billion for 6000 new vehicles. Alas, the numbers have been going down ever since.
The low appetite for buying has been experienced in the wholesale and retail sectors too. Government construction work, as everyone knows, is at its low level since ascending into decline in the fourth quarter of 2015. The number of cattle marketed as well as milk production have dropped. Even beer production – Namibia’s favourite past time – cannot be compared to the production of the last three months of 2014.
Beer production always spikes up in the last three months of the year and start declining in the first three months of a New Year only to normalise and start picking up again towards the end of a year. However, looking at statistics, it seems Namibia’s truly last happiest moments were last experienced towards the end of 2014, as the subsequent peak periods were never the same again.
In all fairness, the financial woes were not entirely Namibia is doing, as the world economies had been undergoing several challenges. The last two years, especially, brought renewed challenges to the fore, issues that continue to some extent, of unabating calls for protectionism, falling commodity prices, complacent financial markets, uncertainty of political directions in major markets, and now trade wars between the world’s advanced economies. But Namibia has its share of blame – something which Schlettwein always highlights cautiously with the best financial technical language available: Over spending, over commitment, or over and above the budget, and fiscal sustainability. Essentially what he has been, and continues to, say is that until today Namibians have been reckless by throwing money at the problems in hope of achieving economic growth and fiscal stability.
Under his watch, that is no more. That’s why he rather gives money to spend on productive sectors only. Government institutions are required to submit their budgets and the Treasury scrutinises the items. Those not a priority would be cut out. The release of funds to government institutions is done inline with what has been budgeted for, but of course there would be those who first enter into contracts for items not budgeted for. And seemingly, that is something that irks Schlettwein the most.
“We should all guard against over-commitment of the budget as appropriate,” he said this week. As far as he is concerned, dishing money out of the budget would force government to spend money it does not have, and then it borrows well above its means, taking away the country’ fiscal space. “Fiscal space is the only tool we have, to be credit worthy, credible and a predictable economy,” he cautions.
Going forward, the minister is also cautious of the risk factors coming with protectionist’s policies, which he says are already “offsetting the pace of the growth momentum going forward.” Indeed, the populist rhetorics of ‘America first’ by the US president Donald Trump, and the on-going tariff wars with China and Europe, as well as the UK’s Brexit from the European Union have the world on the edge. Schlettwein says these unilateral populist directions are undermining multilateral institutions, but Namibia still have faith in the multilateral institutions’ support for prevailing trade regime.
Whatever the final effects of such rhetoric, Namibia being a small but open economy, would have to continue trading with the rest of the world if her economy is to survive and remain one of the most strongest in the region. And Schlettwein points out that one of the survival tactics being deployed is to continue pushing for intra-trade with Africa and within the region.
To illustrate his point, he cites the recent revelations, by Bloomberg, that while Africa’s trade with the rest of the world expanded 11 percent to US$907.6 billion last year, the portion of trade within the continent declined to 14 percent of the total. South Africa, Namibia and Nigeria accounted for more than 35 percent of intra-Africa trade last year. New Era Reporter
2018-07-20 09:59:03 | 2 years ago