Windhoek -Despite the best efforts to realign public expenditure as closely as possible to the projected revenue, the national budget tabled yesterday is a harbinger of tough times ahead.
A large chunk of the N$62,5 billion budgeted for total expenditures for the year would go towards financing the country’s most pressing social needs, such as health, education and social welfare for the country’s vulnerable citizens, as well as servicing the country’s mounting debts.
The expenditures are set against estimated government revenue of N$56,4 billion.
Namibia’s elderly again received favourable consideration in the budget, having received an additional N$100 increase to their monthly pension grant, which would be N$1,200 as of next month.
Consideration was also given to the public servants’ Public Service Medical Aid Scheme (PSEMAS), which had nearly run dry and was reportedly on the verge of failing to pay doctors for services rendered.
A N$2,5 billion injection was made to PSEMAS.
The N$62.54 billion budget for the 2017/18 financial year includes the non-interest expenditure of N$57.54 billion, allocations to government ministries and offices for the year.
The Ministry of Basic Education received the highest allocation of nearly N$12 billion, followed by N$6,5 billion to the Health Ministry and N$5,6 to the Defence Ministry.
The Treasury also budgeted N$5 billion to service its debts, which had decreased to 41,9 percent of GDP.
However, the next three years may see the Treasury controlling the purse-strings more tightly as it seeks to align “future expenditure growth to key national priorities as and when resources become available,” Finance Minister Calle Schlettwein said yesterday.
Set to be a headache for policymakers over the next three years is the issue of raising wages, salaries and benefits of public servants.
Personnel expenditure will this year gobble up 44,9 percent of all public expenditure, rising to 46,1 percent by the 2019/20 financial year.
This is a sharp increase from the previous year when 39,7 percent of the public expenditure was allocated to government personnel.
Schlettwein yesterday expressed concern that such an “elevated [level of] spending on salaries leaves less room for other important budget areas.”
This is especially so considering that the Namibian economy grew by a meagre 1,3 percent last year.
What ought to bring relief to the finance minister is the evident decline in the budget deficit, having lowered to 3,6 percent for this year from 6,3 percent last year.
Projections see the deficit (the difference between government’ revenue and its spending) falling to 2,5 percent before it eventually plummets to 1 percent.
Nevertheless, a look at the development budget allocation shows how little room is available to fund important projects in the country, with only 33 new development projects having been introduced for financing over the next three years.
The development budget has been slashed by 23 percent, with spending for the next three years capped at N$24,2 billion.
To underscore the change of course, Schlettwein spoke of the “containment of non-productive expenditure” over the next three years.
Subsidies and bailout allocations to public enterprises, as well as other social grants, would decrease to 24,9 percent of the total budget, whereas they made up 28,2 percent of last year’s budget.
For this year Schlettwein is encouraging more public-private partnerships, especially in infrastructure development.
“As fiscal policy becomes less expansionary, timely implementation of structural policy reforms and the harnessing of alternative means of financing are necessary to mitigate financing gaps and to support capital formation and medium-term economic growth,” he said.
The finance minister also announced that government, in collaboration with the private sector, has established infrastructure development and liquidity generation work streams, which have identified bankable infrastructure development proposals, streamlining private sector capital and public private partnership arrangements in the priority areas of road, rail, water, energy and ICT infrastructure.
Projections for this year put economic growth at 2,5 percent, which would not be not sufficient to significantly swell the country’s revenues.
On the upside, Treasury is anticipating a 9,7 percent increase in revenue for the year, because of stronger than previously anticipated receipts from the Southern African Customs Union (SACU).
In the medium-term, higher SACU receipts and earnings from increased exports from the mining sector are expected to improve the current account balance and improve the external position.
“However, new policies to improve the productive and exporting capacity of the economy and a stronger fiscal balance remain important for the medium to long term improvement of the terms of trade for Namibia,” Minister Schlettwein noted.