Windhoek — Adequate measures are in place to control and monitor the level of government debt, and ministerial targets relating to debt and contingency liabilities are within target.

This was the view of the Permanent Secretary in the Ministry of Finance, Erica Shafudah, who yesterday addressed a national budget briefing workshop in Windhoek. The workshop was attended by members of parliament, senior government officials, as well as economic and labour market experts.

Shafudah noted that the budget deficit is under control and has been kept within a set target, while an Integrated Financial Management System (IFMS) is further enhanced to introduce measures to control fiscal targets.

The 2013/14 budget, which was tabled by Finance Minister Saara Kuugongelwa-Amadhila, in the National Assembly last week has been described as favourable for the working class, as it delivers both salary increases and tax cuts. Furthermore, the chairperson of the Parliamentary Standing Committee on Economics, Natural Resources and Public Administration, Ben Amathila, who opened the workshop, said this year's budget was well received as "it puts money back into the pockets of taxpayers."

The size of this year's budget is N$47.6 billion, compared to last year's budget of N$37.7 billion, representing a 26.3 percent increase. Against this total outlay, the budget forecasts total revenue at N$40.1 billion, leaving a fiscal deficit of N$7.4 billion which is 6.4 per cent of the Gross Domestic Product (GDP).

This shortfall will be met through cash reserves of N$4 billion, net external financing of N$678 million and domestic borrowing of N$3.4 billion.

One of the reasons the budget is pleasing to the general public is because it contains handouts in the form of income tax relief for individuals and corporates, while spending (both consumption and investment) is increased. In this sense the budget increases domestic demand.

However, whether or not the budget will stimulate job creation has been questioned by some analysts. "Income tax cuts are broadly equivalent to the transfers to households. In much the same way as transfers, permanent or temporary income tax cuts would raise demand for pay cheque to pay cheque households. By contrast, either form of cut would be neutral for wealthy households who save in anticipation of higher taxes or lower spending in future," commented Michael Schultheiss, resident representative of the Friedrich Ebert Foundation, the organisation that sponsored yesterday's workshop.

Schultheiss said when households are not credit-constrained, a permanent tax cut may raise demand, but temporary cuts would probably have little effect. "From this, it follows that temporary income tax cuts targeted at credit-constrained households are probably the most effective counter-cyclical direct tax changes. For the proposed income tax cuts, we tend to believe they would favour the pay cheque to pay cheque households, and unlike the 09/10 tax cuts, the current proposals are significant to make a difference on demand growth," concluded Schultheiss.