Shiimi to show dexterity in tight budget…spending, public debt and wage bill in focus

Home National Shiimi to show dexterity in tight budget…spending, public debt and wage bill in focus
Shiimi to show dexterity in  tight budget…spending, public debt and wage bill in focus

With the national budget scheduled to be tabled this afternoon, rising public debt is weighing heavily on the minds of economists, while others have called for a reasonable return and accountability on the billions of dollars invested in education. 

Taking these factors into consideration, it is evident that today’s budget, to be tabled by finance minister Iipumbu Shiimi, is not only important from an economic perspective, but also has substantial political significance since the general elections are slated for November 2024. 

The annual budget is thus expected to cover important bread-and-butter issues affecting the majority of Namibians. This is particularly relevant to pressing matters including employment opportunities, education, health, the rising cost of living, poverty and inequality. Shiimi is likewise expected to address the pressing issue of deficit financing in order to stabilise the debt‐to‐GDP ratio that is projected to soon pass the 70% mark. Experts claimed last week that Namibia has been borrowing N$29 million daily for the last 12 years. In 2010, Namibia’s public debt was around N$11 billion, which debt stock is now expected to increase to N$138.4 billion, equivalent to 69.6% of gross domestic product (GDP) in FY2022/23.

Shiimi is also expected to reprioritise, reallocate and review spending to meet policy priorities and improve efficiency.


According to economics lecturer and MD of Twilight Capital Mally Likukela, the budget’s focus areas are expected to be an increase in the capital outlay to sustain economic growth, and finding resources to provide much-needed relief to ordinary citizens facing elevated stress levels due to exorbitant inflationary pressure. 

“With the economy having done well in the past six months, sustaining this momentum to the next financial year remains reasonably high. The finance minister will, therefore, try to keep his pace of spending to boost growth further while playing a balancing act to shrink the fiscal deficit,” he observed. The biggest complication for Shiimi in the upcoming budget is an exercise of managing several objectives. “This will include the drive to fiscal prudence, stimulating growth without accompanying inflation, garnering more resources through non-tax measures, and providing concessions where necessary. This is the most difficult challenge because all of these objectives run in different directions, so the finance minister must exercise considerable dexterity to move ahead decisively on all counts,” Likukela noted. Pointing out that thus far, recovery in consumer spending has not been sustainable, he added that Shiimi will attempt to put more money in consumers’ wallets, and is expected to emphasise sustainable growth in demand by making important pronouncements towards efforts to create jobs and increase income- generation opportunities. 

Government will increase expenditure into the social sector, aimed at protecting the vulnerable and raise their resilience. The minister will extend government’s support to poor and vulnerable Namibians, while staying on course to restore the health of public finances. Most non‐interest spending is directed to the social wage, which includes health, education, housing, social protection, employment programmes and local amenities,” said Likukela. 

Moreover, with Namibia being an agrarian economy, the Twilight Capital MD emphasised that agriculture and its associated sectors are the largest source of livelihoods in the country. 

Said Likukela: “Government will continue to prioritise it. The demand for allied sectors, such as food processing, horticulture, livestock production, organic farming, smart proteins, floriculture, dairy and nutraceuticals, is increasing. Hence, the government must make budgetary allocations and develop monitoring mechanisms to support implementation on the ground”.  A sizeable investment is also expected into infrastructure, which is in line with the country’s commitment of becoming an international logistics hub. In the same vein, the economist expects additional budgetary support to be extended towards this sector to fund initiatives and measures to strengthen logistics and supply chain management infrastructure. 

From a fiscal health perspective, government continues to face large spending pressures, including the risk of higher‐than‐budgeted public service wages, as well as demands for additional funding from financially-distressed state‐owned companies. “However, higher‐than‐anticipated revenue- collection will somewhat slightly ease the pressure. This revenue will be used to alleviate short‐term spending pressures and reduce the budget deficit. Government will once again reiterate its commitment to prudent spending and sustainable finances. 

Debt burden 

According to economics lecturer at the
University of Namibia, Jesse de Beer, the public debt situation is the most prominent issue that needs to be addressed in the budget, or at least referred to. “This must be seen against the background of moderate and improving economic growth. However, the improvement in economic growth is not enough to change the debt repayment capacity of government. One would like to see announcements that can impact on the long-term growth trajectory and address unemployment, especially youth unemployment,” De Beer pointed out. The Unam lecturer stated that this might necessitate structural reforms aimed at improving the business climate, investing in skills development and boosting agricultural productivity, as well as investments in clean technologies and energy efficiency. 

Education investment

“We cannot be pumping billions of dollars into education with no return. This needs some control measures because we are getting no return on this investment, which cannot be given a blind eye,” warned Popular Democratic Movement (PDM) shadow finance minister Nico Smit. He further hopes for a sensible budget that will take care of the vulnerable in terms of housing, sanitation and an increase to small and medium enterprises to help create much-needed jobs. Meanwhile, Lameck Odada, an economics lecturer at the Namibia University of Science and Technology (NUST), expects the education allocation to increase after the dismal performance in last year’s examination results to support schools in terms of resources. 

He added that more allocations should be on the way for the mines ministry to propel the green hydrogen project in the country.

“As usual, the ministry of defence will get the bigger chunk, and we also hope to see an allocation specifically to deal with the current floods causing havoc in the northern parts of Namibia,” said Odada. Local economist Magdalena Nangolo likewise expects that a good chunk will be apportioned to the ministry of health, with the education ministry taking the largest.  “Considering the recent developments of the flooding, the ministry would need such funds to allocate for remedial teaching and learning interventions for theministry of basic education and of course higher education,” she stated.

Nangolo added that the institutions of higher learning would need the funds to boost their operations and capacity, considering the pass rates of students and seemingly low admission and registration numbers.

Wage bill

Meanwhile, an economist at stock brokerage Simonis Storm, Theo Klein, last week highlighted that Namibia’s development budget receives less money than the operational budget, which is dominated by public wages. 

Government’s total expenditure on the wage bill for public servants currently stands at about N$30.1 billion, which is just over 42% of the total budget. By the fourth quarter of 2021, the wage bill stood at N$6.3 billion after government agreed to increase public servants’ pay packages by more than N$900 million, following threats of a strike. In 2018, the wage bill was about N$30 billion, compared to about N$13 billion in 2013.

According to Klein, the development budget could be a significant catalyst for economic growth and improved standards of living. He pointed out that the country’s current poverty rates are exactly where they were in 2008. This is despite all the poverty reduction gains Namibia made in its economic boom that have since been completely wiped out. “Since fiscal consolidation commenced, you see this key trend of rising poverty and rising disapproval amongst the Namibian nation”. As such, Klein expects to see an improvement in tax revenue in today’s budget tabling. This is anticipated on the back of improved economic growth and further clarity on when exactly the tax brackets will be adjusted for inflation, as well as laying down the new minimum taxable income threshold. He furthermore expects social grants to improve, while personal income tax, value added tax (VAT) and other taxes are anticipated to remain unchanged.

Set targets 

On his part, managing director at High Economic Intelligence (HEI) Salomo Hei foresees that the education and health sectors will get the biggest chunks of the budget pie. Similar to other economists, he wants accountability in education, which he noted has not delivered the most desired results with such big allocations. 

“We need to have targets. We need to understand what it is that you want to see. There’s no way we are spending the sort of appropriation on education, and at the same time we are putting our young people onto the streets. There needs to be some level of accountability,” he stressed.

According to Hei, much still needs to be done in terms of service delivery. He, therefore, urged prioritising investment in digital technologies and infrastructure, as well as improved governance and enhancing debt transparency. 

“We need direct support for small and medium enterprises (SMEs). The most important thing now is that we need to get to a percentage of the budget that should be allocated to development projects. Through that, we’ll be able to adopt value and have a ripple-effect on revenue, job-creation and making sure our economy becomes inclusive,” he recommended.