Budget: Ambitious deficit limit set

FINANCE Minister Saara Kuugongelwa-Amadhila yesterday proposed to do what most of her predecessors have been unable to manage – keep the Budget deficit well below the target Government has set for itself over the years.

The deficit, Namibia’s growing national debt, and the need to make hard choices to limit Government spending to more sustainable levels were some of the main themes in Kuugongelwa-Amadhila’s first Main Budget speech, delivered in the National Assembly. Among the central figures in Kuugongelwa-Amadhila’s scenario of putting the brakes on Namibia’s Government spending, are:* an estimate that Government spending will amount to N$12,69 billion in the 2004-05 fiscal year, which is some 3,6 per cent higher than spending in 2003-04; * projected income of N$12,1 billion for 2004-05, which represents an 11,7 per cent increase on the revenue expected in 2003-04 ; and * at N$589 million, a Budget deficit that is projected to be limited to 1,6 per cent of Namibia’s gross domestic product – which is well below the three per cent target that Government has set for itself and ended up honouring mostly in the breach until now.In her Budget statement, Kuugongelwa-Amadhila at times sounded like she was a faithful disciple of the sort of fiscal discipline that her immediate predecessor, former Finance Minister Nangolo Mbumba, used to preach in his budget speeches.More often than not, though, he was forced to backtrack in his next budget presentation and report that the State had again been unable to keep within the spending limits set for it, or had over-estimated its expected income for a given year.DEBT PRESSURESBy the time Kuugongelwa-Amadhila turned to addressing the issue of Government’s debt yesterday, it became clear what dangers were foreseen, should tough choices and compromises not be made.Government has previously set itself the goal of limiting Namibia’s national debt to not more than 25 per cent of GDP.But by the end of the 2003-04 financial year (at the end of March), the country’s debt is set to stand at 30,3 per cent of GDP, according to the Minister.A year down the line, by the end of the 2004-05 fiscal year, it is expected to have grown further, to 32 per cent of GDP, Kuugongelwa-Amadhila said.According to financial figures attached to her Budget statement, the national debt is expected to have ballooned by 30 per cent between the 2002-03 and the 2003-04 financial years – from N$7,9 billion to N$10,29 billion.It is projected to grow by a further 16,4 per cent this year, to N$11,988 billion by the end of the 2004-05 fiscal year.The Minister said that it was projected that thereafter, by the end of the 2006-07 financial year, the debt ratio would decline to below 30 per cent of GDP.DEFICIT GOALSTo achieve that goal, said Kuugongelwa-Amadhila, she proposed that the Budget deficit had to be limited to an average of 1,3 per cent of GDP over the next three years.In the 2004-05 financial year, the deficit is projected at 1,6 per cent of GDP, she said.According to additional figures on Government’s finances released yesterday, it is budgeted that the deficit will amount to 1,36 per cent of GDP in the 2005-06 financial year, and to 1,02 per cent of GDP in the year after that.If those figures are realised it will be the lowest budget deficits, relative to the size of Namibia’s economy, that the country will have seen since 2000-01, when a budget shortfall of N$365 million – one of the lowest deficits to be seen under the stewardship of Mbumba – amounted to 1,5 per cent of GDP.Among the central figures in Kuugongelwa-Amadhila’s scenario of putting the brakes on Namibia’s Government spending, are:* an estimate that Government spending will amount to N$12,69 billion in the 2004-05 fiscal year, which is some 3,6 per cent higher than spending in 2003-04; * projected income of N$12,1 billion for 2004-05, which represents an 11,7 per cent increase on the revenue expected in 2003-04 ; and * at N$589 million, a Budget deficit that is projected to be limited to 1,6 per cent of Namibia’s gross domestic product – which is well below the three per cent target that Government has set for itself and ended up honouring mostly in the breach until now.In her Budget statement, Kuugongelwa-Amadhila at times sounded like she was a faithful disciple of the sort of fiscal discipline that her immediate predecessor, former Finance Minister Nangolo Mbumba, used to preach in his budget speeches.More often than not, though, he was forced to backtrack in his next budget presentation and report that the State had again been unable to keep within the spending limits set for it, or had over-estimated its expected income for a given year.DEBT PRESSURESBy the time Kuugongelwa-Amadhila turned to addressing the issue of Government’s debt yesterday, it became clear what dangers were foreseen, should tough choices and compromises not be made.Government has previously set itself the goal of limiting Namibia’s national debt to not more than 25 per cent of GDP.But by the end of the 2003-04 financial year (at the end of March), the country’s debt is set to stand at 30,3 per cent of GDP, according to the Minister.A year down the line, by the end of the 2004-05 fiscal year, it is expected to have grown further, to 32 per cent of GDP, Kuugongelwa-Amadhila said.According to financial figures attached to her Budget statement, the national debt is expected to have ballooned by 30 per cent between the 2002-03 and the 2003-04 financial years – from N$7,9 billion to N$10,29 billion.It is projected to grow by a further 16,4 per cent this year, to N$11,988 billion by the end of the 2004-05 fiscal year.The Minister said that it was projected that thereafter, by the end of the 2006-07 financial year, the debt ratio would decline to below 30 per cent of GDP.DEFICIT GOALSTo achieve that goal, said Kuugongelwa-Amadhila, she proposed that the Budget deficit had to be limited to an average of 1,3 per cent of GDP over the next three years.In the 2004-05 financial year, the deficit is projected at 1,6 per cent of GDP, she said.According to additional figures on Government’s finances released yesterday, it is budgeted that the deficit will amount to 1,36 per cent of GDP in the 2005-06 financial year, and to 1,02 per cent of GDP in the year after that.If those figures are realised it will be the lowest budget deficits, relative to the size of Namibia’s economy, that the country will have seen since 2000-01, when a budget shortfall of N$365 million – one of the lowest deficits to be seen under the stewardship of Mbumba – amounted to 1,5 per cent of GDP.