All eyes on public debt

TAXPAYERS have to cough up increasingly more since Independence to foot the bill for Government debt.

‘Public debt servicing costs have steadily increased as the stock of public debt and the number of loan guarantees have risen thanks to sustained budget deficits,’ economist Robin Sherbourne says in his book, ‘Guide to the Namibian Economy 2009’, which was released yesterday.Figures in the Medium Term Expenditure Framework (MTEF) indicate that Government will have to borrow some N$15 billion this year. However, this is based on an estimated surplus of N$3,9 million Finance Minister Saara Kuugongelwa-Amadhila last year set her heart on.Due to the global economic crunch, the Minister is expected to declare a huge deficit when she tables the 2009-10 Budget in the National Assembly this afternoon. As a result, public debt is anticipated to be significantly higher.’Government is in a constant search for better ways to allocate revenues but changing spending patterns is a bit like turning round a supertanker,’ Sherbourne says in his book.In it he also examines budget trends since 1990, concluding that ‘hand in hand with commercialisation and the growth in the number of parastatals, has gone a significant increase in the budgeted amounts transferred to the parastatals’.According to the MTEF, this year will be no exception. It provides for N$100 000 million for Air Namibia and some N$94 million for the NBC. Government has a history of deviating from the MTEF, so these amounts are likely to be higher.Another budget trend, according to Sherbourne, is a growing defence budget.Spending allocated to Defence Affairs and Services has almost doubled from 1990-91 to 2007-08. ‘As a whole, it has been the fastest growing component of public expenditure since Independence,’ he says.This year’s MTEF allows for more than N$2 billion for the Ministry of Defence.Sherbourne furthermore says that although allocations to education and health rose rapidly in the years after Independence, it has undergone a long-term decline since the mid-1990s. After peaking at 26,5 per cent of total spending in 1997-98, education has had to be content with a share of less than 20 per cent. Health has had to make do with less than 10 per cent.Allocations to social security and welfare grants have risen enormously since Independence, Sherbourne says.The Government medical aid scheme has ballooned from N$56 million in 1997-98 to N$621 million in 2007-08. Over the same period social pensions rose from N$103 million to N$660 million, while support for orphans and vulnerable children (OVCs) has grown from N$7 million in 1992-93 to nearly N$130 million in 2007-08.After 18 years of Independence, Sherbourne says it is still hard to say exactly how Namibia’s ministers of finance determine their fiscal stance.’There is little sign that fiscal policy is used counter-cyclically to stimulate the economy in times of slowing demand, nor is there much evidence that Namibia’s political cycle influences spending.’The basic approach appears to involve taking a fairly conservative estimate of revenue for the coming year and then adding up to three per cent of gross domestic product (GDP) as an acceptable budget deficit depending on the stock of public debt and political pressures for additional expenditures,’ he says.Sherbourne also points out that Government has never met its own target of public spending not exceeding 30 per cent of GDP.’It seems that as long as revenue is available, there are no political prizes for taking the knife to the bloated public service, especially as the political cost of a smaller public service is more immediate and certain than the political benefits of a more efficient public service and lower taxes.’