Namibia: Govt in Deeper Debt Ditch

NAMIBIA'S government is expected to borrow almost N$40 billion and increase the country's debt burden to N$158 billion in the next three years.

The growing national debt will also see the government spending at least N$35 billion in debt interest payments over the same period.

These are among the figures released by the Ministry of Finance with the tabling of the 2020/21 mid-term budget review by finance minister Iipumbu Shiimi yesterday.

The review was not an additional or new budget, but a reconsideration of spending priorities and a reallocation of funds to speak to current needs following the tabling of the government's budget for the 2020/21 financial year in May.

Shiimi said the N$72,8-billion budget as presented in May was tabled amid extreme uncertainty due to the Covid-19 pandemic and when its full effect on the economy and public finances was still unknown.

With new developments, however, Shiimi said Covid-19 containment measures have paid off, and with Namibia's Covid-19 state of emergency lifted, the economy has gradually reopened, offering respite for increased economic activity.

This, he said, placed a high premium on rekindling sustainable economic growth and stabilising the necessary conditions for long-term sustainability, the creation of jobs and the reduction of poverty and inequalities.

"Climbing out of the ditch that Covid-19 has brought, requires timely and firm supportive pillars of policy action. To achieve this, enabling macro-critical structural reforms are needed and their implementation could no longer be delayed," Shiimi said.

He said that reforms to be implemented include looking at keeping government debt in check, mainly through reviewing the public sector wage bill and voluntary early retirement, in combination with freezing vacancies.

There would be a review of the state medical aid scheme, amongst other items, he added.

Most of what Shiimi said in the National Assembly yesterday is an improved repetition of what his predecessor as finance minister, Calle Schlettwein, has been saying all along, some analysts say.

The N$72,8 billion in planned government spending during 2020/21 and initially expected revenue of N$51,4 billion would leave a budget shortfall of N$21,4 billion.

Upon review, Shiimi said, the deficit is set to come down to about N$17 billion, due to stronger revenue flows into state coffers.

Shiimi said preliminary revenue for the six months covered by the budget review stood at N$26 billion, while spending, including expenditure commitments, stood at N$35, 8 billion.

He also said total central government debt had reached N$106,1 billion, and was expected to increase to N$119 billion at the end of the financial year.

Some analysts say the expected growth in debt balance was too high and would be unsustainable.

Economist Indileni Nanghonga said the country would be in a scary place if its government debt level is to reach 77% of national output in the next three years. "That is significant, it is unsustainable and needs to be looked at," she said.

On the reallocation of funds within the budget, Shiimi said N$140 million would be shifted from the operational budget to the development budget.

An amount of N$601 million in operational spending will be reallocated and be split between several ministries and state-owned entities.

Reallocated funds include N$326,4 million for the Ministry of Basic Education, Arts and Culture, an additional N$147,6 million for the Ministry of Health and Social Services for the procurement of pharmaceuticals, Covid-19-related expenses and personnel, as well as N$157,7 million for the Ministry of Gender Equality, Poverty Eradication and Social Welfare for social grants.

Some N$50 million will be channelled to the Electoral Commission of Namibia, N$35 million to Namibia Wildlife Resorts and N$40 million to TransNamib.

The Ministry of Agriculture, Water and Land Reform will get an additional N$40 million for water infrastructure.

The Ministry of Defence will get a further N$22,3 million for war veteran programmes.

Nanghonga also said it was premature to expect the government to reshuffle much, given current conditions, and that funds were just where they needed to be.

Nanghonga, however, commented it was good to see that the reallocation was pro-growth, although in her view not sufficient.

Asset managers PSG Namibia's Eloise du Plessis said proposals such as early retirement for civil servants and the review of the government's medical aid scheme were good points which would lower the government's heavy wage bill.

"I have to admit I heard good things in this budget review, but much remains to be done," Du Plessis said. "I'm not sure this is enough to get us out of trouble, but I'm thankful that minister Shiimi did put up certain brakes and did not simply double down on spending."

Investment firm Cirrus Capital's Rowland Brown also said he was unsure whether the time frame for some of the envisaged reforms would push for needed growth.

"While there are some good ideas in the reform proposals, these until action proceeds, remain proposals. Most concerning, however, is that the scope of these reforms is not sufficient to drive a rapid growth and employment recovery," he said.

"Rather than focusing on another prosperity plan, we need an aggressive deregulation plan," he said.

Economist Salomo Hei said it was good that the review mainly focused on fiscal sustainability as opposed to fiscal consolidation.

Although he gave a nod to the increase in the capital budget, he also called for more public investments.

More From: Namibian

Don't Miss

AllAfrica publishes around 800 reports a day from more than 130 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.