By: Nghiinomenwa Erastus
The 2021/22 Mid Term Budget Review will be tabled in the National Assembly on 3 November 2021, announced Finance Minister Ipumbu Shiimi last week.
The review is a bit late than usual, compared to previous years.
The budget review meets the state’s financial requirements during the remainder of the financial year ending 31 March 2022.
Shiimi tabled a N$67,9 billion “Boosting Resilience and Recovery” – non-interest operational expenditure was budgeted at N$53,9 billion.
Even though lower than the pandemic hit 2020, the budget had a shortfall of N$15,9, together with other financing requirements of N$13,6 billion that popped up in the borrowing strategy.
As a result, Shiimi needs around N$30 billion to fulfil his budgetary promises to government ministries, agencies, and offices.
Public revenue has since plummeted to an estimated 28,2% GDP in 2021, from the pre-pandemic average rate of 30,5% of GDP.
The government fiscal position is worsening with the budget deficit recorded at an estimated historic high of 9,5% of GDP in 2020/21.
With public debt estimated at 68,5% of GDP over the coming financial year- by the end of September 2021, the ratio was 63,2%.
This means the money the government borrowed is equivalent to 63,2% of the value of goods and services it produced.
This presents the treasurer with a debt servicing headache. Last year he paid an estimated N$7,7 billion in interest, taking up 13,8% of his revenue.
For this financial year and next year, he is expected to direct more of the country’ revenue (16%) to interest payment given the government’s high budget deficit last year and this year.
In October, Shiimi paid a total of N$1,2 billion in coupons to bondholders.
Shiimi promised last year to ensure that the sustainability of public finance is his highest policy priority.
At the same time, his budget was intended to strike a balance between boosting the country’s resilience in the core dimensions of sustainable growth and anchoring the fiscal operations in a sustainable macro-fiscal framework.
The mid-term budget reviews do not constitute an additional budget.
Instead, it reallocates resources to alternative priority programmes within the appropriated expenditure ceiling.
Given the current circumstances is to realise allocative efficiency, fight and mitigate the socio-economic impacts of Covid-19.
At the same time, Shiimi also face a daunting task to tame spending while averting the sudden withdrawal of fiscal support and guard against reversals on outcomes, and
Shiimi will also set forth the fiscal consolidation policy stance for the following Medium Term Expenditure Framework.
The current policy priorities with indicative measures are consistent with macroeconomic stability, fiscal sustainability, inclusive growth, and more jobs.
According to the Bank of Namibia Quarterly Bulletin released in September, the country’s products and services are valued at N$134,3 billion.
While it owes domestic and foreign investors N$118,9 billion by then-
However, this figure could increase as the government has been proactively borrowing through October and will continue borrowing until March 2022.
The International Monetary Fund (IMF), on its latest report, prepared for the G-20 economies meeting for policy support.
The report highlights that smaller-than-expected fiscal packages could reduce global growth while offsetting inflationary pressures.
The IMF researchers indicated that individual countries’ fiscal policy would need to be tailored to their local economy and pandemic conditions.
As Shiimi flexes his fiscal policy, chess moves to inject necessary economic momentum the monetary is done and has struggled to create momentum with their cheap money.
The monetary committee recently decided to keep the cost of money in the economy at the same rate (3,75%). They said this is adequate to maintain the peg and facilitate economic activities.
Despite inflation being trajectory mode, as captured by the country statistics agency, goods and services prices have been rising since the beginning of the year, led by food prices.
The IMF, however, cautioned that the monetary policy should be prepared to act if risks of de-anchoring of inflation expectations become tangible.
As the recovery takes hold, a gradual return to rebuilding buffers will be warranted. Combined with structural reforms, wrote the IMF.inclusive growth.
Since 2020, the overall monetary policy rates have generally remained low.
However, pressures to gradually withdraw support are building amid an increase in inflation and rising financial vulnerabilities.
In line with IMF staff recommendations, various economies are projected to maintain an expansionary monetary policy stance in 2021, reflecting the need for sustained policy support amid well-anchored inflation expectations.
In this respect, major economies’ central banks are expected to avoid raising policy rates prematurely due to temporary spikes in inflation.
In Namibia, the central bank indicated that inflation is transitory/temporary And well anchored.
The IMF also warned that central banks should stand ready to tighten monetary policy if risks of de-anchoring inflation expectations become tangible.
The mid-term budget and economic review will provide the fiscal stance and the economy’s performance for the financial year Budget and macro and budgetary outlook to year-end.
Shiimi also sits on an update on the impact of his N$8,1 billion fiscal stimulus package that later scaled up to N$9,1 billion.
It comprised N$6,7 billion total budgetary allocations and N$2,4 billion government guarantee-backed loans to cushion the impact of the pandemic on the lives and livelihoods of Namibians while boosting the long-term economic recovery potential.
The Namibian economy has been experiencing recessionary pressures four years before the outbreak of Covid-19.
Before 2020, the domestic economy contracted by 0,1% on average since 2016 and further declined by 8% in 2020 as the Covid-19 pandemic set in.
The rebound to a sustainable economic growth trajectory remains uncertain as the global pandemic evolves.
Shiimi mid-term budget review will update the public on utilising his fiscal policy muscles to steer the economic boat through the turbulent water of pandemic and low confidence.
Email: erastus@thevillager.com.na
