Budget For or Against the Poor? The Debate Continues

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By Wezi Tjaronda WINDHOEK Whether or not the current budget is indeed pro-poor and pro-growth continues to be the centre of debate. The 2006/7 budget, which will see an expenditure increase of 18 percent, was tabled recently and has been widely lauded as pro-poor and pro-growth. Among others, the budget has increased allocations for social grants for the elderly and an additional allocation to speed up registration of orphans. It has also seen an increased allocation for education and health, infrastructure and public administration. At a budget analysis session of the business community yesterday, First National Bank Economist Martin Mwinga said the allocations in the budget would do little to stimulate economic growth. Mwinga noted that a pro growth budget would result in an increase in disposable income and increase private sector investment. But coming at a time when citizens of the country have not seen tax relief for some time, Mwinga said, there would not be much impact on the economy because more money in people’s pockets would mean more money to buy goods because consumption is the most important stimulant of economic growth. “As long as tax does not change, it will be difficult to invest,” Mwinga said, adding, “The economy responds more to tax changes and not expenditure.” Namibia has the highest corporate tax in the SADC region. Botswana’s is 15 percent, while South Africa has around 28 percent. Even in cases where civil servants get an increase in their wages, Mwinga said, since many employees are pressed, they would use the money to pay off their debts or school fees for their children, which would result in personnel expenditure not doing much to push the economy. The budget would be termed pro poor and pro growth if it stimulates the supply side of the economy in terms of mining, agriculture and manufacturing sectors. The agriculture and fishing sectors have been declining during the final quarter of 2005 mainly due to a decline in the number of cattle being marketed locally and high operational costs brought by high fuel prices respectively. Mwinga said in normal situations, the government would have bailed out say the fishing sector by either giving them tax relief or money for them to expand and stop laying off workers. The current budget however, said Mwinga, does not do this despite the problems the fishing sector for instance has been experiencing since the beginning of 2005, which has been reflected in low landings of most fish species such as crabs, tuna and rock lobster among others. “The budget should be used to do that because if it does not, it may result in these sectors be-ing stagnant,” added Mwinga. He however commended the government for the allocation to the tourism sector to improve infrastructure in order to attract more tourists. “This is the type of intervention we need to boost the economy,” said Mwinga. Minister of Finance Saara Kuugongelwa-Amadhila, like many others have maintained that this year’s budget, which will see an expenditure of N$15.2 billion, is pro poor and pro growth. Apart from increasing social spending, it has also increased allocations for infrastructure and public administration. She also defended government’s stance in not offering tax relief due to the fact that the government is not in a position to do so yet.