The Finance Minister made the best of a very difficult situation having committed to a high percentage (48 percent of total expenditure) ) of social spending – education, health and poverty alleviation – in an economy that has grown only by 1.3 percent last year and set to grow 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’.
Through this budget proposal, Namibia also averted a potential fiscal crisis and the country is set to retain its fiscal sovereignty. The budget’s adherence to fiscal discipline will please ratings agencies and will continue to control our fiscal destiny. The budget is prudent, but highly redistributive in difficult economic conditions.
The key feature of the budget is continued yet firm commitment to fiscal consolidation, no major surprises on the tax side and shift towards productive spending.
For the man on the street, the budget means tightening our belts. We seem to have reached the bottom of the economic challenges and need to tighten our belts for the next 12 to 18 months. The fact that individual income taxes have not been increased is a big plus and makes us regionally competitive.
Expect trading with Angola and South Africa to remain low over the next two years.
The Minister has missed an opportunity not to increase VAT with a concomitant increase in social grants. Despite the regressive nature of VAT, overall increase in tax revenue will ultimately be needed. We need renewed economic growth to boost tax revenues.
Aggressive and continued non-interest expenditure reduction could ultimately prove self-defeating. Specific measures to increase government revenue – a lesson learnt from the current economic difficulty – are a concern. We seem again to rely on and have been rescued by improved SACU revenues, a rebound in commodity prices and a positive global outlook.
The 2017 budget reveals just how fiscally constrained Namibia has become. The overall economy has shrunk in real terms and the money set aside to stimulate economic growth falls far too short of what is needed, but is evidence of what is affordable.
We need to continue to attract foreign direct investment, whilst efforts to mobilise domestic investments to grow the local economy are a welcome policy intervention.
* Johannes !Gawaxab