Namibia has to repay the Southern African Customs Union (SACU) about N$3 billion in the next financial year, as its share of the estimated N$7.6 billion shortfall incurred by the common revenue pool.
This repayment is over and above the projected downward adjustments in SACU receipts associated with the slowdown in the South African economy.
Growth of the South African economy, which is closely linked with the Namibian economy, has been marked down to 1.5 percent for 2015 from the 2 percent estimated in the budget and is only projected to advance to 1.7 percent next year, with an average of 2.4 percent over the next Medium Term Expenditure Framework (MTEF), which is still subject to significant downside risks.
During the tabling of the Appropriation Amendment Bill (Mid-Year Budget) on Tuesday, Finance Minister Calle Schlettwein said the consolidated fiscal framework for the next MTEF revises Namibia’s total revenue for the 2016/17 financial year downwards by N$7.05 billion – from N$63.05 billion to N$56.00 billion.
“A significant share of this downward revision, amounting to over N$3 billion is due to the combination of the repayment for the deficit in the SACU Common Revenue Pool and the revised lower projections for the Pool going forward. Downward adjustments are also made to the domestic revenue outlook, in line with the revised economic outlook,” Schlettwein said.
He continued that as a proportion of Gross Domestic Product (GDP), revenue is projected to moderate to 29.2 percent in the next financial year, from 35.1 percent in 2014/15 and will average 30 percent of GDP over the MTEF.
However, Schlettwein is convinced that proposed total expenditure cuts averaging over N$5 billion annually over the remainder of the current MTEF, supported by revenue-raising and base-broadening measures will fully compensate for the estimated revenue losses.
“Thus, revenue is projected to increase by 13.8 percent on average over the MTEF, from the revised N$56 billion in FY2016/17, to an estimated N$72.54 billion by FY2018/19. In keeping with the budget deficit ceiling of less than 5 percent of GDP annually, the total expenditure ceiling for FY2016/17 is revised downward by N$5.64 billion, from N$71.24 billion to N$65.60 billion, increasing on average by 7.4 percent to reach, at least potentially, N$82.51 billion by FY2018/19.
“This means that the scope of expenditure expansion will have to be kept well below the 5 percent of GDP to guard against a steep rise in public debt,” the finance minister warned.
Meanwhile, total debt stock for the next financial year (2016/17) is estimated at N$60.85 billion and is projected to increase by 13.4 percent on average over the MTEF to reach N$80.10 billion by the 2018/19 financial year, corresponding to 30.3 percent of GDP, seen against the threshold of 35 percent of GDP.