A budget ‘designed to restore confidence’

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Edgar Brandt

Windhoek-Initial reactions from economic analysts in response to yesterday’s tabling of a N$62.54 billion national budget are that Finance Minister Calle Schlettwein had no major surprises and in fact sent out all the right messages to restore confidence in the domestic economy.

Minister Schlettwein yesterday revealed his proposed expenditure outlay, which is equivalent to 36.6 percent of GDP and represents an increase of 1.7 percent from the revised budget of N$61.50 billion tabled the previous year.

Total spending for the next three years is projected to remain relatively flat, with the indicative allocation for 2018/19 set at N$61.86 billion and N$62.72 billion for 2019/20.
In particular, the ceiling for 2018/19 would be set at N$61.86 billion as once-off payments for services are completed.

The total non-interest expenditure for 2017/18 amounts to N$57.54 billion, which is projected to increase by about 2.2 percent annually to reach N$59.59 billion by the 2019/20 financial year.

“The minister made the best of a very difficult situation, having committed to a high percentage of social spending (48 percent of total expenditure), including education, health and poverty alleviation, in an economy that grew only by 1.3 percent last year and is set to grow at around 2.5 percent in 2017. Only faster economic growth can ease the pressure off Namibia’s public finances and get us out of this ‘storm’,” remarked Johannes Gawaxab, the executive chairman of Eos Capital.

He added that through yesterday’s budget proposal, the country averted a potential fiscal crisis and is set to retain fiscal sovereignty.

He noted that the key features of the budget are “continued, yet firm, commitment to fiscal consolidation, no major surprises on the tax side and a shift towards productive spending”.

Also commenting on the 2017/18 national budget, Ngoni Bopoto, a research analyst at Namibia Equity Brokers, said he was satisfied that Schlettwein is addressing the appropriate issues to restore confidence in the management of the economy.

“The minister has, in our opinion, sent out all the right signals. The budget reflected consistency of priorities and displayed confidence in the growth outlook (albeit optimistic) and recovery in the revenue trajectory.

“The inclusive economic growth and the social elements remain an area of focus and stern warnings have been sent out with regards to acts of fiscal indiscipline and corruption,” Bopoto noted.

Frans Uusiku, an economist at Simonis Storm Securities, agreed that there were no major surprises in the budget, particularly as Schlettwein did not divert from the Medium Term Economic Framework (MTEF).

“It is a really positive outlook, but we expected more specifics in terms of revenue projections. However, it is a fair budget given the many challenges in terms of the revenue squeeze and growth forecasts,” he said, adding that while the current economic climate does not provide much flexibility, the budget should restore confidence in the local economy, as it re-aligns expenditure with expected revenue.

State revenue for 2017/18 is projected to reach N$56.4 billion, growing 9.7 percent from the N$51.5 billion estimated to have been collected during 2016/17. This increase in revenue is expected to derive from an increase in Southern Africa Customs Union (SACU) receipts.

“What we would want to see is the revenue squeeze being addressed in the long run, particularly in light of the fact that SACU revenue is still subject to revision,” Uusiku concluded.

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