26 February 2013

Namibia: Saara Under Pressure to Spend

Photo: http://www.newera.com.na
A confident Minister of Finance Saara Kuugongelwa-Amadhila increased government spending to a record N$47.6 billion for the 2013/14 financial year.

ALL eyes will be on Finance Minister Saara Kuugongelwa-Amadhila this afternoon to see how she keeps Namibia on the straight and narrow fiscal path in the 2013-14 budget after she reportedly received requests for billions more than set out in her Medium Term Expenditure Framework (MTEF).

The current MTEF allows for total expenditure of about N$41 billion in 2013-14, only 2% more than last year. However, ministries apparently asked Kuugongelwa-Amadhila for around N$15 billion on top of this, of which more than N$6 billion is needed to cover operational expenditure in the coming financial year.

Should Kuugongelwa-Amadhila buckle under this pressure, Namibia's deficit for 2013-14 could spiral up to N$16 billion - nearly triple the N$5,7 million she pinned the deficit at in the MTEF. Spending about N$15 billion more would send the country's total debt stock to about N$44 billion, or about 38,5% of gross domestic product (GDP), which is above the government target of 35%.

Bigger operational spending won't just be needed to cover civil servants' salary increases and bailouts for especially Air Namibia, the Namibian Broadcasting Corporation and the National Housing Enterprise (NHE). It would also fund an increase in social grants, which The Namibian understands might be on Kuugongelwa-Amadhila's agenda.

The minister was reportedly also considering pumping more money into the police, health and social services and education.

Economists whom The Namibian spoke to, however, expected Kuugongelwa-Amadhila not to deviate too far from the MTEF.

"As a continuing theme from last year, the upcoming budget is likely to be a continuation of last year's budget theme [Doing More With Less]," Tega Shiimi ya Shiimi, chief executive officer of Sanlam Investment Management Namibia, said.

"Namibia had fiscal space leading up to the 2012-13 budget and it has used that space. By the same token, the space is not limitless. To maintain its sovereign debt rating at its current level, the debt ratio should not be allowed to stray too high," Shiimi ya Shiimi said.

FNB Namibia economist Daniel Motinga also believes that the 2013-14 budget will be "broadly" in line with the MTEF.

"The big surprise was the 8% [civil servants'] salary increase of last year which will put indirect pressure on the capital budget given the revenue dynamics," Motinga said.

The increase is expected to cost the taxpayer an additional N$3 billion in 2013-14. The Namibian understands there was also a request for more than N$500 million to "expand" existing staff structures of the civil service.

Although he expects the government to continue on the "flat expenditure profile announced in the 2012-13 MTEF", IJG Namibia economist Romé Mostert said bailouts for state-owned enterprises (SOEs) are "probably the one surprise we know of".

"As per the latest MTEF the government budgeted an outflow of N$164 million to Air Namibia. Recent reports indicate that bailout packages might be anywhere between five and ten times as much," Mostert said.

"This bailout on its own might represent a 2,5% increase in total budgeted expenditure."

Independent economist Klaus Schade said he didn't expect "major surprises" in the budget, but rather shifts towards the policy areas as outlined in especially the Fourth National Development Plan (NDP4).

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