Namibia: Budget Deficit to Widen - Economic Experts

President Muhammadu Buhari presents national budget (file photo).

ECONOMIC experts said the budget deficit could widen from the current N$8 billion to anything between N$10 billion and N$11 billion.

Simonis Storm and First Capital Namibia expressed this ahead of the budget announcement in parliament today.

Wealth management firm Simonis Storm (SS) expects revenue to undershoot by 8,2%, standing at N$52,9 billion during the 2019/20 financial year.

In their analysis, SS also said they expect a drop in revenue of 4,2% and 12,6% to N$54,3 billion and N$53,6 billion in 2018/19 and 2020/21, respectively.

"If the economic downturn prolongs, we continue to project lower revenue in the coming years. This is on the back of increasing job losses (lower income and value added tax revenue), closure of companies (lower corporate tax) and continuous reliance on volatile Southern African Customs Union receipts," SS said in a statement this week.

Moreover, the financial services group said they expect the budget deficit to widen further to N$10,7 billion in the 2019/2020 financial period, which is equivalent to a -5,9% deficit to gross domestic product.

The group further said they do not foresee significant improvements in the revenue space over the next two years, while expenditure remains elevated and unsustainable.

"Thus, we expect the budget deficit to widen further to N$12,7 billion in 2019/2020, or -6,6% of GDP. Based on our calculations, the actual budget deficit, excluding statutory payments, is approximately N$2 billion. However, the debt servicing cost makes up 75,9% of the overall deficit (including statutory costs). This will remain high until the redemption of the Eurobond in 2021," they noted.

Meanwhile, First Capital Namibia's chief executive officer, Martin Mwinga, said the company expects the 2019/20 expenditure to stand at N$70,2 billion, translating to a 5,8% budget deficit. However, the company expects the budget to still be within manageable levels.

The company also expects revenue to rise by 3% to N$60 billion.

"We expect the 2019/20 budget to continue with expenditure containment measures that started three years ago to ensure healthy government finances and fiscal policy sustainability through a reduction in deficits and debts to below target levels during the mid-term expenditure framework," he said.

Mwinga, who was speaking at the company's fiscal policy analysis themed 'Namibia's Fiscal Policy at a Crossroads' on Monday, said the finance minister is likely to allocate most of the government's budget to the social sectors.

"We expect the 2019/20 budget to maintain social spending commitments, particularly education, health and social protection - but at a lower rate of increase in spending, compared to previous years, to accommodate the economic stimulus measures," he forecast.

Mwinga said the budget will also look at ways of supporting the private sector through various policies as the economy shows a slow recovery.

"There are critical sectors such as construction that we expect to receive great support from the government. When construction was faced with tough times, we saw how it negatively affected the economy," he added.

The economist further stated that although they expect a bigger budget, they expect taxes to remain the same, except for adjustments on sin taxes.

PSG Namibia has said earlier that although economic growth is expected to recover over the medium term, it will be hampered by fiscal consolidation, structural problems such as high unemployment, a large skills shortage, a lack of investment in value-added sectors and ongoing global trade tensions.

-, Twitter: Char_Ngatjiheue.

Don't Miss

AllAfrica publishes around 900 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.