The Budget Roundup
The Minister of Finance, Honourable Calle Schlettwein tabled the N$62.52 billion with revenue projected at N$56.43 billion- on the back of higher anticipated SACU receipts and improve in some of the domestic revenue stream.
The budget had an inclination of exports towards primary goods and dedicate efforts towards development was themed “Maintaining Pro-growth Fiscal Consolidation: Making impact where it matters”. The budget came at a time when there was a backdrop of a challenging fiscal and economic environment that saw government having difficulties in meeting its obligations hence fiscal consolidation programs were installed including budgets cuts.
These were painful but the government believes it was short sacrifice with long-term fiscal gain. In 2017/18, the Minister seek to reduce deficit in 2017/18 financial year to approximately 3.6% of GDP down from 6.3% that economy operated at in 2016/17 financial year, while stabilising the debt at 42% of GDP to strengthen macroeconomic stability. The Minister admitted that if the debt level could not have been checked it could easily have gone to 46% of GDP and reach a point of precarious situation.
The Namibian economy is emerging from harsh conditions locally while the global economy was also not favourable with the impact of commodity price crash slowing the global economy. Most importantly South Africa and Angolan economy were heading south wards impacting Namibia negatively. For three consecutive years, Namibia has endured drought which had negative impact in agriculture, construction and retail sector. There was pressure in liquidity due to the weak market confidence, effect of austerity measures hence a tight cash flow situation and overall growth was at mere 1.3% a sharp fall from 5.3% achieved in 2015.
Overall the government will curtail further sudden withdrawals of the fiscal pulse of the economy by curtailing excessive growth in non-core recurrent and capital expenditure and safeguard the country sovereign investment rating. There is need for industrialisation based on country’s competitive advantage and exploiting global value chain. The budget would provide resources for industrial development projects in support of the Growth at Home Strategy and Industrialization Policy.
These interventions will contribute to the development of the domestic productive and diversification capacity of the economy, with more gains for the domestic economy and positive trade balances being the ultimate objective. 15.8 percent of total non-interest expenditure or some N$9.09 billion is allocated to the economic and infrastructure development part of the budget.
This represent part of industrialisation project. The allocation to the economic and infrastructure cluster is further supported by targeted allocations to Public Enterprises in the economic sectors for targeted infrastructure and development finance projects.
Infrastructure development will continue to benefit from Public sector Investment and will be enhanced through PPP especially in logistics to achieve logistic hub, objective green scheme investment unlocking domestic activity and national competitiveness and job creation The key projects are the rehabilitation of the national railway, the on-going expansion of the Port of Walvis Bay, several national roads, water and storage infrastructure, the Mass Land Serving Programme and increased funding to the Public Financial Institutions for private sector support and SME development.
An SME financing strategy providing for the establishment of a Venture Capital Fund, a credit guarantee program and monitoring and coaching program is to be developed for SME development and job creation. The Minister noted the Bank of Namibia is addressing the SME Bank issue so that it can fully take its position in assisting SMEs. Health and Education budgetary provision were increased to support basic services, pharmaceuticals, free education and expand tertiary education and vocational training for improved skill development in the economy, while allocation to housing are safeguarded.
Priority on Poverty Eradication and improvement on Social welfare was outlined with funding for food bank increased as government is committed to reduce inequality through delivery on land and tax policy reform while improve service through a performance and result based work culture. Overall the budget seek to consolidate and steer growth and should be commended for redirecting the economy towards right direction.
HIGHLIGHTS OF THE BUDGET
• Total Budget estimate for 2017/18 is N$62.52billion which equivalent to 36.6% of GDP again estimated Revenue of N$56.43 billion representing a shortfall of N$6.09 billion
• 2016 growth was 1.3%, a sharp downward from 5.3% for 2015. In 2017 growth is projected at 2.5% and average 3.5% over the METF
• The budget had two main objectiveso fiscal consolidation by aligning expenditure to revenue thus reducing growth in public debt, which stand at 42% of GDP, to 3.6% of GDP down from 6.3% in 2016/17 o Stimulate growth by providing resource for industrial development project in support of the growth at home strategy and industrial policy
• Overall the 2017/18 Budget seek to; o Strengthen macroeconomic fundamental and rebuild fiscal buffers o Support inclusive growth and economic diversification o Contribute towards eradication of poverty and improve on social welfare o Further contribute to reduction in income inequality and achieve shared prosperity o Deliver timely, reliable and affordable public service and meeting government contractual obligation
• Budgetary provision to Health and Education were increased.
• An SME Financing Strategy, providing for the establishment of Venture Capital Fund mooted
• Domestic demand was low in 2016 due to reduction in private credit expansion to business and households
• Stock of international reserve stand at 2.9 months import cover • Inflation shoot to 8.3% in January 2017 from 6.4% in 2016
• Current account deficit stood at 11.9% of GDP in 2016 on the back of negative trade balance exerting pressure on overall balance of payment
• SACU receipt are expected to improve