Windhoek-Finance Minister Calle Schlettwein yesterday told parliament that government is skating on thin ice as far as its financial position is concerned. A situation, he said, that would persist in the months to come.
Although the measures put in place to contain costs and improve cash circulation in the economy have started yielding results, Schlettwein said it would take some time restore normality.
He was nevertheless optimistic about the fact that market confidence and domestic liquidity are improving as a result of the fiscal consolidation measures put in place by the ministry since mid-2016.
“This will, however, require time to reach normality,” the minister said.
He also pointed out that Treasury had managed to broaden its budget deficit-financing plan, with the loan from the African Development Bank (AfDB) having been approved last month.
“This facility has eased the tightness in public finance and shows that the budget is fully funded. Cash flows are, however, tight and are anticipated to remain so in the foreseeable future,” he advised.
The AfDB agreed to advance a N$3 billion loan to Namibia last month to “support the government’s ongoing bold structural reforms aimed at driving long-term job creating growth and reducing income equality,” the bank said.
Namibia had applied to borrow N$10 billion for a two-year period, with N$6 billion for the general budget deficit and N$4 billion for project financing.
The minister’s statement follows recent claims by ministries and other government institutions that they had no money to fund operational costs, including fuel for vehicles and other service offerings to the public.
Some institutions were unable to fill vacant positions and tertiary institutions, such as the College of the Arts in Katurtura that is cutting course offerings for the 2017 academic year due to the lack of funds, as New Era reported this week.
However, Schlettwein yesterday assured the public that “we are on course with the implementation of the budget as appropriated”. He, however, warned that “the economic environment remains fragile and beset with downside external risks, some of which have already materialised.”
Treasury had anticipated some of the risks, he said. “Our policies and forward-looking measures will allow us to adjust to this fragile environment,” he added.
Treasury was also prepared for the economic downturn being experienced in the South African economy, especially the effect it would have on future Southern African Custom Union (SACU) revenue.
Namibia had budgeted on projection of receiving N$19,6 billion for the current financial year, up from N$14 billion last year, but it is understood SACU receipts for 2018/19 are poised to fall by N$2 billion to N$17,8 billion.
“In cautiously anticipating the downside risks to growth and the effects of external factors we have equally taken a cautious approach to revenue projections for this MTEF (medium-term expenditure framework). In particular, we have anticipated possible reductions in SACU revenues,” Schlettwein noted.
“Similarly, we have projected growth in the domestic revenue to remain generally flat, with overall year-on-year growth in total revenue projected at only 1,3 percent in 2017/18 financial year, compared to 10 percent the previous year. This is due to anticipated gradual recovery in the economic activity,” the finance minister said.
South Africa is experiencing persistent low growth and has gone into technical recession, as key sectors of the economy, including manufacturing, retail trade fared badly over the last quarter.
Naturally, this has potential negative implications for the Namibian economy, which is part of SACU and the common monetary area.