2015 Budget: What’s Calle got up his sleeve?

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WINDHOEK – With hours to go before new finance minister Calle Schlettwein tables the 2015/2016 national budget, speculation is rife that the new government would increase social grants for old people, especially in light of the quest to eradicate poverty in the country.

Compounding the speculations are analysts who yesterday told New Era of their expectations for a budget that “particularly focuses
on welfare by increasing the old age pensions,” and that “supports both the common man on the street and corporate sector.”
The pronouncement by the Minister of Poverty Eradication and Social Welfare, Bishop Emeritus Zephania Kameeta, who a week ago said social grants are very low, has only fuelled the raging fire of speculation that social grants would be increased significantly.
Schlettwein – who has returned to the finance portfolio as minister after a stint as minister of trade and industry – is expected to table the national budget for 2015/2016 in the National Assembly this afternoon.
He was previously the finance permanent secretary for seven years before being appointed as deputy minister of that portfolio in 2010.
“We expect this year’s national budget to particularly focus on social welfare by increasing the old age pensions. Since they are talking about a pro-poor budget they might not increase Value Added Tax (VAT) as VAT has significant impact on the poor,” says Rome Mostert, Managing Director at IJG Securities.
Last year’s budget did not increase the old age grant, but provided resources for the rollout of the grants across the country, and increased the grants of orphans and vulnerable children to N$250.

Standard Bank Namibia’s Manager of Economic and Market Research Mally Likukela spoke of an increasing need to improve the social safety networks such as social grants and old age pension support, and poverty alleviation programs.
“Over and above, the minister is expected to table a budget that will provide a balanced policy framework aimed at supporting both the common man in the street and the corporate sector,” said Likukela.
Expectations are also for this year’s budget to have a higher operational expenditure than the N$50.47 billion put forth in the previous Medium Term Expenditure Framework for 2015/16, and N$54.13 billion for 2016/17, due to the increase in new ministries and an enlarged government structures.
Likukela foresees an increase in the development budget because there is a renewed commitment to have a “pragmatic recognition of macro-economic and social challenges facing the country and a thrust towards structural reforms.”
“On the expenditure side we expect them to be quite aggressive by maintaining or increasing spending on infrastructure. We also expect a bigger budget deficit and this will have to be financed. Local fixed income demand is pretty much saturated so government might need to finance the budget deficit from overseas and that in itself could create a few problems,” said Mostert.
The downside to a ballooning national budget, though, is a budget deficit, which Likukela is expecting to be between 4.5 and 5 percent. Last year’s deficit was at 5.5 percent, thanks to a 29.1 percent increase in operational expenditure to pay civil servants their salary increases agreed with trade unions in the previous years and to make salary adjustments according to the new job evaluation and re-grading, which civil servants have patiently awaited for the past years.
“The deficit will be driven by the ambitious spending program that the government embarked upon a few years ago which still needs to be implemented. Given the slow implementation of some of the major projects, the increased spending will continue before it moderates in the 2017/18 financial year,” said Likukela.
As for the revenues, Mostert is expecting a more conservative approach but says he does not think that revenue will meet last year’s targeted forecasts. He is also not expecting an increase in tax rates and foresees government relying more on economic growth for revenue generation.
There is also keen interest on how the development budget would improve compared to last year’s increase of 17.6 percent to N$9.58 billion. The MTEF for 2014/15 -2016/17 had estimated the development budget to grow at a rate of between 10 percent and 12 percent in that period as part of the “expansionary efforts” to boost economic growth and reduce unemployment.
Likukela says the key areas that would most likely require additional funding include the Targeted Intervention Programme for Employment and Economic Growth (TIPEEG), mass housing project and the inevitable investments in the power infrastructure.

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