Government will be lessening its grip on fiscal consolidation in the 2018 financial calendar in a bid to be responsive to the sub-normal growth and unemployment headache caused by huge cuts in government spending last year.
Schlettwein’s reactionary fiscal consolidation measures shrunk the private sector and collapsed construction which dragged the entire economy into a drawn out recession.
However, the minister has come out to say the budget cuts have managed to get a grip on the economy from a potential abysmal plunge while payments towards outstanding invoices have stimulated some activity in the private sector.
“The austerity measures that we have introduced, the consolidation path has to be followed through, but we also learnt from 2017 that the consolidation or the austerity measures that we did put in place had a negative impact on growth. It had a negative impact on employment,” admitted the minister at a business breakfast held by Standard Bank.
Very sharp consolidation in an economy where the public sector is 60% of the total economy is an action that has very serious negative impacts on the economy as a whole, he explained.
“What we have also learnt is that the consolidation maybe is better if it is milder and not as harsh as it started. The harsh step that we had to take was to stop a sliding bus. If we hadn’t taken it, I think we would not only have consumed that part of the gains of consolidation, we would actually not have stabilised the fiscus. So I think we are very positive that the steps were right but now we have to adjust and be responsive to what it caused,” explained the minister.
As the political administration enters the year of reckoning whose start has been characterized by firings, cabinet reshuffles and stringent cuts on spending in public offices, the minister said government will no more be solving problems “by spending more but spending better”.
“We must clamp down on illicit activities, on corruption. Those are all eroding on the quality of spending in a very significant way,” said Schlettwein.
The minister said for the last three financial years, the economy’s ratio of debt to GDP has declined and deficits reduced.
“So the ratios of what caused the pressure are improving. That is in spite of very flat growth, though the consolidation is more on the expenditure side and not on the growth side. That is what we see as consolidation is unfolding. We will not be completely out of the woods in one year. We believe that the consolidation must be over long periods,” Schlettwein said.
Business tycoon and president of the Namibia Chamber of Commerce and Industry, (NCCI), Sven Thieme, said the private sector has to unite away from its silos and private agendas and realise opportunities in the economy that come with the recession-induced deep-seated problems.
“If we are a serious partner to government we can come up with an open debate with government and see what are the areas that we can work on together. I think there is a wonderful African proverb which says if you want to move a mountain we have to pick up the stones today. And picking up the stones for today is for sure, I think we need to think differently,” he explained.
Meanwhile the minister has said 2018 will be the first step in the recovery process which requires a change of attitude.
“We have endured the worst,” he quipped.
Presently, Simonis Storm Securities expects a government revenue contraction of 5.7% which translates to N$53.9 billion for financial years 2018/19 compared to an estimated budget revenue of N$57.2 billion
Resultantly, the brokerage firm anticipates the budget deficit as a percentage to GDP to be at -5.6% of the economy for the same periods, compared to a revised -5.3% estimated by the ministry of finance.
This is credited to a contraction in SACU revenue and lower tax collections.