Windhoek — Economic analysts expect that the national budget, which is scheduled to be tabled in March, will focus on themes of pro-growth, fiscal consolidation, economic stabilisation and a return to growth. These themes have been suggested as the government grapples with slow economic growth of two percent or less and as it scrambles to reduce the national debt down to 35 percent from over 40 percent.
"I would recommend such themes because the minister has his job cut out for him as far as returning the economy to its growth path is concerned," said Mally Likukela, the managing director of Twilight Capital Consulting.
"This year's budget is very important in the sense that it has to achieve multiple tasks. Currently the prevailing economic uncertainty as a result of conflicting messages from the government and private sector about the true state of the economy has fuelled panic and nervousness in the economy, locally and internationally," he noted.
Responding to questions from New Era, Likukela suggested that first and foremost the national budget should try to calm the nerves of domestic economic players in the private sector, as well as international players such as investors and rating agencies.
"It should give a consistent and compelling story of the true state of the economy and outlook and should spell out in no uncertain terms what the government intends to do to respond to the situation," Likukela commented.
In addition, he feels that the budget should communicate the successes of the consolidation efforts thus far, but should also not be silent on the failures thereof. "If any success, e.g. public debt declined, budget\deficit narrowed, all these should come out, and rightly so - we all know the damage the consolidation measures have caused to the economy. Let the budget shed some light there as well," Likukela said.
"Namibia's international competitiveness has come out loudly recently in the media, so as a selling point, I expect the budget to say a word or two on this as well. This is some of the good news the government would want to put across in order to obscure the obvious challenges the economy is facing. Challenges such as corruption, unemployment, poverty and weakening institutions," he continued.
He feels the budget will focus on amplifying fiscal management measures the government has undertaken as well as those it intends to undertake. The bloated civil service will receive a lot of attention, particularly given the fact that it has been labelled as one of the major fiscal leakages, Likukela commented.
Minister of Finance Calle Schlettwein recently stated that a new approach is needed to serve the economy and, in this regard, Likukela expects to see a significant shift in financing and planning from the initial Medium-Term Expenditure Framework (MTEF) projects.
"The alignment of the budget to the MTEF, NDP5 and Harambee has been disturbed or shaken by the unexpected turn of events in the global and local economic situations. Most assumptions on which these plans were premised have completely changed, hence rendering them near impossible to achieve. Because of the lack of funds and fiscal space, some of the flagship projects of Harambee - food banks around the whole country will be difficult to roll out as per the plan - NDP5 - major capital projects - will indefinitely be put on ice, and no significant new projects will come on board. The social sector focus of the past budgets will be a thing of the past, where significant increase in allocation for old age pensions, social welfare, etc. was the norm. My expectation is that although the government will not scrap NDP5 and Harambee, a significant element of these plans will be done away with due to the funding requirements and urgency to come up with an emergency plan to rescue the ailing economy," Likukela explained.
Weighing in on the upcoming national budget, Ngoni Bopoto, an economic analyst at Namibia Equity Brokers, is hopeful that measures alluded to in previous budgets, such as disposal of non-core assets and partial listing of selected state-owned enterprises (SOEs), will start to gain meaningful form.
"On the expenditure side we anticipate continued curbing of non-productive expenditure in particular. The principal objective will be to rein in prudential measures like the debt-to-GDP ratio, which is a key sovereign credit rating concern. Given the recession - based on Namibia Statistics Agency (NSA) and quarterly GDP numbers - we cannot afford to continue increasing growth in public debt. Measures to slow its accumulation, coupled with introduction of tools to ensure optimal resource allocation, should be made prominent," Bopoto commented.
Regarding an outlook for the rest of 2018, Likukela said it is clear that there will not be much growth in 2018, as all economic fundamentals remain pretty much similar to how they looked in 2017. He noted that leading indicators such as vehicles sales, credit to private sector and business confidence indicators still point downwards. "To prevent the further worsening of the situation, leadership needs to back up the public pronouncements on fiscal management measures with tangible actions. They need to show leadership that commits to the plans and their implementation," Likukela concluded.