Govt to borrow more despite consolidation

03 November 2017 Author   CHAMWE KAIRA
Namibia can expect to borrow more money, which may raise further serious concerns about the country from international ratings agencies.
The mid-term budget presented by Finance Minister, Calle Schlettwein, in Parliament on Thursday showed that the Government plans to spend an additional N$4,5 billion in the 2017/18 financial year.
Eloise du Plessis, Head of Research at PSG Namibia, said she was surprised by the additional spending since revenue is expected to decline over the Medium Term Expenditure Framework (MTEF).
“The budget deficit targets given in the March budget will not be met and will be deteriorating. From what it looks like now, Government is going to be borrowing a lot more to fund this spending. This will not sit well with the ratings agencies and it is possible that we will see more downgrades,” she told the Windhoek Observer.
Economic Association of Namibia Executive Director, Klaus Schade, also noted that fiscal consolidation has not yet achieved the desired targets.
He noted that the budget deficit had increased to 5,3 percent from an envisaged 3,6 percent and the debt to GDP ratio will remain at about 44 percent without decreasing as expected in the main budget.
“The revised budget deficit and public debt ratio is based on economic growth of 1,6 percent, which might still be at the higher end given the contraction during the first two quarters.”
Schade said reallocation to social sectors such as education for textbooks, school feeding programme and catering services for hostels as well as for pharmaceuticals for health facilities, indicate that there was little prioritisation when budget cuts were implemented. 
“With little fiscal space going forward, prioritisation of vital expenditure has to receive more attention,” he said.
The economist said fiscal ill-discipline needs to be addressed seriously and necessary steps need to be taken in order not to de-rail the fiscal consolidation process.
He further said that the recently released Auditor General’s reports also point to serious weaknesses in accounting systems in many Government offices, ministries and agencies.
“It is not clear whether the full extent of the lower SACU revenue is factored into the revised Medium Term Expenditure Framework, since Namibia might need to repay overpayments received this year. This could put more pressure on the revenue side,” he said.
Schade welcomed the proposed listing or partly listing of some SOEs as a good idea that should be pursued. 
He also welcomed the proposed Public Private Partnerships in infrastructure development, but said these negotiations usually take time and is not a short-term measure to close funding gaps.
Fiscal indiscipline by accounting officials and State-owned companies who spent money more than what was allocated in the 2016/2017 budget means that Government will pay N$2,2 billion in expenditure arrears whose payments were frontloaded in August this year.
“This additional budget comprises an amount of N$2,2 billion to account for the settlement of outstanding invoices emanating from the 2016/2017 financial year and N$2,4 billion for allocation to the various ministries with critical resources shortfalls for the provision of services,” said Schlettwein, when he presented the 2017/18 Mid-Year Budget Review.
Schlettwein warned that effective expenditure control measures and fiscal risk management framework will be put in place to ensure that public expenditure is contained within the budgetary and financing framework and the quality of expenditure is improved.
The minister’s tough fiscal stance on ministries and Government agencies over the past year, paid off somewhat with savings from ministries and Government agencies amounting to N$486 million.
The spending cuts came from savings on travel, training, cuts on corporate gifts and refreshments as well as hiring freezes, among other cuts.
The minister announced extra funding to various ministries for essential services. The main allocations included N$807m for higher education, N$899m for basic education, N$100m for health services, and N$41m for poverty eradication. The public  broadcaster, nbc, was allocated N$80 million for operations.
The minister disclosed that the budget deficit for the 2016/17  financial year increased from the revised budget estimate of 6,3 percent to 6,9 percent.
Public debt as ratio of GDP stood at 38,3 percent, about 0,8 percent better than the budget estimate of 39,1 percent, due to a better nominal GDP outturn relative to the revised forecast.
Another major announcement was that the Infrastructure Fund at the Development Bank of Namibia (DBN), has been established with an initial size of N$2,5 billion.
Further to support economic growth, the Government plans to get into Public Private Partnerships with projects worth N$2 billion, utilising an African Development Bank (AFDB) infrastructure loan worth N$4 billion.


The Windhoek Observer is an English-language weekly newspaper, published in Namibia by Paragon Investment Holding. It is the country's oldest and largest circulating weekly.

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