Namibia: Debt, Deficit Hit New Records

NEW minister of finance Iipumbu Shiimi will this year be remembered as the first finance minister to have government debts of more than N$100 billion under his watch.

The N$72,8-billion budget tabled by Shiimi yesterday is the biggest in Namibian history, and comes at a time when the government's sources of revenue are set to significantly decrease. With the government's income during the 2020/21 financial year projected at N$51,4 billion, the budget shortfall will amount to a record N$21,4 billion.

The times are scary, and the impact of Covid-19 has put many countries in a very difficult position. Those which had accumulated buffers have received blows, but not as fatal as those which had not built up reserves.

Presenting the budget in the National Assembly, Shiimi said he was presenting it during one of the most challenging times in the global, regional and domestic economy.

Although times are tough, he assured that the government is on a saving mission this year.

"[This] budget aims to achieve four main goals: to save lives, save livelihoods, save jobs and incomes, and to place Namibia in a stronger position to thrive in the foreseeable future," he said.

The government's revenue from personal income tax and indirect taxes are set to decrease by more than 20%, pushing the treasury to either borrow more and further enslave future generations with more debt, or tap from savings.

Shiimi however said this year's budget is a "single-year" one, and will be financed through a combination of own savings and domestic and external borrowing, which will see government debt reaching N$117,5 billion, or 68,7% of gross domestic product (GDP).

The government's revenue outturn is expected to be N$51,4 billion - against total spending of N$72,8 billion, made up of N$57,9 billion in operational expenses, a development budget of about N$6,4 billion, and some N$8,4 billion to service the country's increasing national debt.

The minister said the Namibian economy is projected to contract by 6,6% in real terms this year, before returning to growth of 1,1% in 2021, and growth of between 2% and 3,6% in 2022.

He said this is mainly because net consumption and investments are expected to decline this year, and so will the final consumption of goods and services.

Should this materialise, government revenue will drop by at least N$8,3 billion, or 14,3% below the previous estimates for this year, reflecting the impact of the Covid-19 pandemic on various revenue streams.

This will leave a record budget deficit of 12,5% of GDP, which Shiimi said would be "a once-off rise, as government seeks to adequately respond to the challenges posed by Covid-19".

The social sector will account for the largest share of expenditure, at N$31,1 billion.

Leading this pack is the Ministry of Education, Arts and Culture, which will receive N$14,2 billion, followed by the Ministry of Health and Social Services at N$7,95 billion, and the Ministry of Gender Equality and Child Welfare with a budget allocation of N$5,3 billion.

The Ministry of Higher Education, Training and Innovation is expected to receive N$3,3 billion, to be split among the University of Namibia (N$900,2 million), the Namibia University of Science and Technology (N$503,9 million) and the Namibia Students Financial Assistance Fund (N$1,5 billion, including a guarantee-backed loan facility of N$238 million).

This social net is expected to take up almost half the budget.

The economic sector will be allocated N$14,2 billion, while public safety is to receive N$13,1 billion.

The Ministry of Defence and the Ministry of Finance are the kings of these sectors combined, with each set to be allocated N$6,2 billion.

The Ministry of Home Affairs, Immigration, Safety and Security will receive N$5,95 billion, while the Ministry of Works and Transport and the Ministry of Agriculture, Water and Forestry will receive a combined amount of N$3,7 billion.

The Ministry of Industrialisation and Trade is allocated N$174,8 million, the judiciary N$375,7 million, and the Ministry of Justice N$480,7 million.

The Anti-Corruption Commission is to receive N$61,6 million from the budget.

Tailing the allocations is the administrative sector, which will collect a combined N$4,5 billion. The Ministry of Urban and Rural Development is allocated N$1,7 billion, the Ministry of International Relations and Cooperation N$1 billion and a combined N$232 million is allocated to the National Assembly and the National Council.

Shiimi said given the challenging economic landscape, now is not the time to introduce new taxes.

He however said alcohol and tobacco use would become more expensive, with 'sin taxes' on wine and spirits to be hiked.

The minister said a packet of 20 cigarettes will cost an extra 74 cents, cigars will cost an extra N$6,73 per 23 grammes, and beer or cider will cost an extra eight cents per 340 millilitres.

Shiimi said the transitional arrangements for the establishment of the long-awaited Namibia Revenue Agency will begin this financial year.

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