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Schlettwein losing war on fiscal consolidation?

09/01/2018
by Kelvin Chiringa
News

Finance minister Calle Schlettwein vowed that the national purse will remain tightly closed and monitored in the 2018 business calendar to cushion the state from bankruptcy at the back of a sluggish economy, yet the high spending on the military is proof that he is losing that war, analysts have reasoned.

Expenditure on the military has spiked in the past ten years, with statistics released in December indicating that this is from N$2.8 billion (2007) to about N$7 billion (2016).

Schlettwein’s fiscal consolidation stance received a standing ovation in 2017 but the likelihood of this yielding solid results remains dubious, analysts have submitted. 

Simonis Storm Securities projects expenditure for the 2018/19 fiscal year at N$64.5 billion relative to N$61.9 billion which had initially been projected.

This suggests an additional spending of N$2.5 billion for this fiscal year until 2019 and N$2.8 billion for 2019/2020. 

“I do not think he seems to be winning the argument. The IPPR has been saying for a number of years that we need to make some sensible cuts on military spending even before this current fiscal crisis,” said Institute for Public Policy Research (IPPR) director Graham Hopwood. 

Highly acclaimed as the only way out of 2017’s economic mess, the consolidation measures have not seen government visibly and decisively taking a stand, something which Simonis Storm Securities took as a strong advice to GRN.   

“We only foresee a turn- around once Government takes a firm stand on fiscal consolidation and policies that are pro-growth. We believe that fiscal discipline need to be exercised,” said economist Indileni Nanghonga.   

Questions remain on whether Schlettwein’s rhetoric on aligning expenditure with revenue will also see him wearing a brave face and lock horns with the securocrats in a bid to clamp down on excessive cash-flows towards their direction from the national budget.

“There must be some elements and some projects and programs that could be cut back just to include them in this current need to basically restrain spending. That’s going to be the case for the next two to three years. It just makes sense to have a more rational approach to defense spending,’ says Hopwood. 

The minister however indicated that the fiscal consolidation measures maintenance will be gradual as the economy steers into 2018, thus casting dark clouds over hopes of a quick fix on military spending. 

Hopwood says only a rational discussion about it would be the infant steps towards addressing this, albeit such discussions have been traditionally regarded as affecting national security.  

He affirms that government’s buy-in and political will to the minister’s effort is set to pass the test in the upcoming budget. 

“I think the test for that would be the 2018 budget that we expect by early March. The minister has to make sure that there is a restraint to spending. I think there are still a lot of aspects of government spending which are basically wasteful or projects that are currently not necessary and money could be saved. The big test is to see if government still has the political will to enforce fiscal consolidation,” he says. 

Meanwhile, expenditure is set to be affected by possible revenue contraction this year on account of falling SACU receipts, Simonis Storm placed the contraction at 5.7 % (N$53.9 billion for 2018/19) compared to the estimated budgeted revenue of N$57.2bn.