Special Focus – Budget 2014/15: A fiscal consolidation or expansionary budget?

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Minister of Finance, Saara Kuugongelwa-Amadhila, Governor of the Bank of Namibia Ipumbu Shiimi and Special Advisor to the Minister of Finance, Paul Hartmann

WINDHOEK – Does the budget by the Minister of Finance, Saara Kuugongelwa-Amadhila, present a fiscal consolidation or a continuation of the expansionary budget tabled three years ago? Analysts say it is more of an expansionary budget than a fiscal consolidation one, since it does not rein in public spending, despite the tough talk by the treasury. 

Not only does it increase expenditure, but it also does not put away some money at a time the country is getting a windfall from the Southern Africa Customs Union, says economist with First National Bank Namibia Daniel Motinga. “The budget deficit at 5.5 percent is higher, which indicates that it is not really a consolidation,” agreed economist Klaus Schade. But of concern to analysts is the rate of execution in government ministries, which is about 80 percent, which they say indicates that the often repeated message for implementation is not getting through to the ministries. “We had challenges of implementing N$50 billion now we have N$60 billion.

There are more resources allocated, but actions are not coming through,” said Motinga, adding that for him the message from the treasury is to spend more because there is more money coming through, in reference to the N$18.12 billion receipts from the Southern African Customs Union (SACU).

The total expenditure outlay of N$60.28 billion presented by Kuugongelwa-Amadhila, reflects a 29.1 percent increase in operational expenditure that now stands at N$48 billion. Part of the increase is to pay civil servants their salary increases agreed with trade unions in the previous years and to make salary adjustments according to new job evaluations and re-grading, which civil servants have patiently awaited for the past years.

The development budget increased 17.6 percent to N$9.58 billion.

Education received N$13.1 billion, nearly 30 percent of the entire budget for this financial year alone, and N$42.10 billion for the three-year financial period ending 2016/17. The money is to “fund the development and upgrading of education facilities, provision of teacher accommodation, [procure] learning materials, recruit qualified teachers, and support institutions of higher learning, including vocational training, as well as providing financial assistance to students.”

The health ministry received N$6.01 billion for this year and N$18.9 billion for the next three years “to address the development and upgrading of health facilities across the country, acquire health equipment and supplies, as well as recruit and train medical personnel.”

The budget does not increase old age grants, but provides resources for a rollout of the grants across the country. However, it did increase the grants of orphans and vulnerable children to N$250.

According to Schade although the N$50 increase for the orphans and vulnerable children is welcome, it is not on par with inflation considering that the N$200 grant was introduced in 2000.

The grant should be around N$500 he said, adding that the increase is also not in line with the 4th National Development Plan (NDP4), which calls for annual adjustments for such grants.

“This is something we need to look at,” said Schade. As for the minister’s message about fiscal strengthening and reforms, Motinga says the message is more of a plea than a substantive policy announcement. “I am not convinced the message is getting through to the line ministries,” he said.

The 80 percent implementation rate is an improvement, he says, but not significant. According to the finance minister the budget rests on four priorities, including bolstering economic growth, the sustainability of development outcomes, fostering human resources development and skills formation, as well as to “curb waste and bureaucracy which is costing the government and hampering the initiative of those who wish to contribute to economic growth and job creation.”

 

 

By Desie Heita 

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