Windhoek-In presenting yesterday’s budget review the message by the finance minister Calle Schlettwein was more realistic: whatever good came out of the brutal fiscal consolidation cannot be allowed to be eroded by whatever unintended negative consequences of that very fiscal consolidation.
Indeed, the reality is that there is an urgent need to strike a balance regarding a consolidation policy stance that did curb public debt in the medium to long-term and alleviated pressure on economic growth, but which narrowed the fiscal space and reduced employment in many sectors, says the minister.
It is not surprising then that, as though to prepare lawmakers on the financial and economic paradox besieging the country, Schlettwein opened his budget review speech in the National Assembly with a famous financial quote: ‘Everyone is saying that we’re on a tightrope, and we certainly are in mid-air over a gorge. But where is the rope?’
In his speech, Schlettwein turned to both the right and left spectrums of economic ideologies, reading from socialist quotes of Fidel Castro and from the saviour of US capitalism, Franklin D. Roosevelt.
A total of N$4.1 billion in additional funds is to be injected into the economy through government ministries’ expenditure books.
The total amount allocated to all government ministries increases to N$61.6 billion from N$51.5 billion previously budgeted, and that amount includes nearly half a billion dollars reallocated from savings, ministries’ expenditures and capital projects that were deemed not urgent or not pressing.
The two ministries of basic education and higher education are among the biggest beneficiaries of the mid-term budget review. The higher education ministry gets N$808 million to give to the two state universities and pay for student tuition fees that the Namibian Students Financial Assistance Fund had outstanding.
The basic education ministry receives nearly N$1 billion to pay for hostel catering, whose unpaid suppliers had schools in some regions near closure, and pay for textbooks and the remuneration of much needed teachers.
The mid-term budget also injects N$150 million into the safety and security ministry whose police had parked their vehicles and toned down crucial crime-fighting operations due to budget cuts.
The defence ministry also get its budget increase, of about N$362 million.
“The budget review has to address the settlement of accumulated spending arrears which have not been reported for budgeting purposes. [It] has to meet urgent resource shortfalls to prevent adverse reversals in the provision of public services and basic needs in the social sectors,” said Schlettwein.
Yet the cautious tone was clear with the minister emphatic that the additional budget “is a one-off special consideration and it must not, and will not, be considered as a norm”.
He pointed out that part of the problems that got the country to allocate additional funds is the “accumulation of unreported spending arrears … a result of a combination of fiscal indiscipline, budget over-commitments and budget overruns due to steep fiscal consolidation”.
But the budget review was not so welcomed by analysts and economists, largely because of it doubling the increase in the budget deficit to 6.3 percent of GDP from 3.6 percent.
“The budget deficit is up and we expect the public debt-to-budget ratio to remain at 44 percent, which is much higher than what was anticipated in the original budget of 42 percent in 2016 and 38 percent in 2017,” commented the executive director of the Economic Association of Namibia, Klaus Schade.
First National Bank’s senior research and development manager, Namene Kalili, says he sees a definite fiscal slippage, and warned that precisely because of the increase of the budget deficit he anticipates a downgrade with a negative outlook from global ratings agencies. “At some stage we will have to get a grip on government expenditure,” Kalili said.
Going forward, Schlettwein said, prospects look much better. Market confidence has been regained and the country’s exports have started to regain momentum as large investment projects in mining commenced with exports. The country’s overall balance of payments remains in surplus of about N$3 billion as at September 2017, and the international reserves have increased to 5.1 months equivalent of import cover, which is more than sufficient to support the currency peg. – Additional reporting by Edgar Brandt