Government expenses should not be allowed to grow faster than revenue, and should be kept in check to enable economic recovery and sustainable growth, finance minister Calle Schlettwein cautioned yesterday.
Presenting his mid-year budget review statement in the National Assembly, Schlettwein said the government is still focused on achieving economic recovery and sustainable growth.
He explained that the government has to date delivered important progress on the basis of which short-run and long-run actions must be anchored, such as narrowing the budget deficit from 8,1% to 4,1%, ring-fencing social sector expenses as well as reducing debt levels, but "more still needs to be done".
"Expenditure is aligned to revenue, which means expenditure must not grow faster than revenue," the minister stated.
To that end, he said in an environment where Namibia is faced with a general economic contraction with a prolonged recession affecting specific economic sectors such as construction, agriculture, wholesale and retail trade, about N$29,4 billion in revenue was collected for the first half of the year, which is about 50% of the budgeted revenue of N$58,4 billion for the 2019/20 financial year.
On expenses, N$30,6 billion had been spent by the end of August 2019, being 52% of budgeted spending of N$66,6 billion.
The minister said the current review echoes the ethos of doing more with less, hence the government decided to reallocate about N$1,18 billion within the budget.
"This amount comprises N$176,3 million realised from the operational budget on personnel emoluments, and N$999,5 million from the development budget. For the development budget, freed-up resources were realised from capital projects with a slow implementation pace or yet to be implemented", the minister noted.
The head of research at PSG Wealth Namibia, Eloise du Plessis, commended the government for saving on its wage bill.
She was, however, not sure whether the cuts in the development budget were a good idea.
"At half-year, we have only implemented 37% of the development budget, but already 52% of the operational budget is gone. So, we are once again taking money from things that should bring future growth, and spending it on expenses," Du Plessis stressed.
Under the reviewed budget, Schlettwein said the government managed to free up about N$1,8 billion through expenditure cuts.
This amount comprises N$176,32 million realised from the wage bill, and close to N$1 billion from the development budget.
The savings on the operational budget were realised through wage bill management and vacancy freeze measures.
The minister said N$632,1 million of the saved funds will thus be reallocated within several ministries, offices and agencies through internal virementation.
About N$545 million will be allocated to ministries, offices and agencies experiencing urgent funding needs for the delivery of essential goods and services.
These needy institutions include the Electoral Commission of Namibia, the safety and security ministry, the basic education ministry, the health ministry and the Namibian Broadcasting Corporation.
The health ministry is the biggest recipient, set to get N$210,7 million for pharmaceuticals and clinical supplies, as well as for the recruitment of health professionals.
The basic education ministry received N$184 million for the recruitment of teachers and the procurement of textbooks, as well as funding for the school-feeding programme.
Schlettwein said the government also allocated N$67 million towards the drought relief programme, and N$88 million to social grants.
Another N$88 million was allocated to the orphans and vulnerable children programme under the gender equality ministry.
The government will likewise spend N$36 million on the visa stickers project under the home affairs ministry.
On taxes, the minister said the government will launch an investigation on the possibility of introducing a lower tax regime for small businesses as a means of encouraging entrepreneurship and business growth.
The state will also expand the export levy base to cover additional products as a means to incentivise value-addition locally.
On manufacturing incentives, Schlettwein stated that tax holidays and preferential tax rates given to some manufacturers and exporters of manufactured goods will be eliminated, and more uniform treatment of taxpayers through the establishment of the Special Economic Zone will be introduced.
With all these expected changes, the minister said: "In an environment of subdued economic growth, it is not the policy intention for general tax rate increases. Such relief would encourage economic agents to produce and invest".
The minister observed that the government has prepared economic growth stimuli that will ensure short-term economic recovery and improve long-term growth potential.
This stimulus package includes fast-tracking the implementation of the N$4 billion African Development Bank-funded projects for agricultural mechanisation, logistics infrastructure and schools renovation programmes, as well as N$2,5 billion that will be further borrowed for water infrastructure project financing.
The lifting of the threshold for unlisted investments in phases from 5%, 7,5 % and ultimately 10% subject to performance criteria, as well as the speedy implementation of structural policy reforms to bolster the competitiveness and business confidence, are also planned.
Schlettwein said launching a small business financing strategy; continuing with effective wage bill reforms; finalising the new equitable economic empowerment framework (Neeef) and the Namibia investment promotion bill will ensure the country sets a better foundation for growth.
Total government spending budgeted for in 2019/20 will remain unchanged at N$66,6 billion.