Budget: Saara’s spending spree

GOVERNMENT plans to go on an unprecedented spending spree in the coming three years.

After two years of budget surpluses, Namibia’s public finances will return to a budget deficit again in the 2008-09 financial year as Government boosts spending at a rate never seen since Namibia’s Independence, Finance Minister Saara Kuugongelwa-Amadhila announced when she tabled the National Budget for 2008-09 in the National Assembly yesterday. “This Budget foresees one of the largest expansions since Independence, accelerating Namibia’s efforts to fight poverty, create employment and generate sustained economic growth,” Kuugongelwa-Amadhila said during her budget speech.”The main thrust of the Budget remains on combating persisting poverty and inequality in our country.The Government’s approach is a concerted effort to improve the social safety net to the most vulnerable and to enhance the standards of basic services,” she said.BENEFICIARIES War veterans, pensioners, people living on social grants, some State-owned enterprises, Namibia’s military and the development of the country’s infrastructure are some of the main beneficiaries of the financial generosity marking the newly unveiled budget.Kuugongelwa-Amadhila announced that old-age pensions will increase to N$450 a month – these are now N$370 a month – while war veterans will receive a monthly allowance of N$2 000 from now on.It is budgeted that over the next three years, N$2,3 billion will be spent on old-age pensions, while N$785 million will be spent on grants paid to orphans and vulnerable children and N$512 million on war veterans’ allowances, the Minister said.SPENDING BOOSTED Government’s spending plans for the next three years also foresee total spending of N$6,4 billion on health and N$14 billion on education, maintaining these two areas as accounting for major portions of overall public spending.In the 2008-09 financial year, spending on health is to be increased by 26 per cent to N$2,1 billion, Kuugongelwa-Amadhila said.At N$4,7 billion, spending on education will be 29 per cent higher in 2008-09 than it had been in the 2007-08 financial year.It is planned to boost defence spending even more dramatically than spending on education and health, though.In 2008-09, N$2,3 billion is to be spent on defence – N$689 million more than the previous financial year.This represents an increase of 41 per cent in defence spending compared to the 2007-08 financial year.In 2008-09, Government will also for the first time spend more money on defence than it does on health.Over the next three years, a total of N$6,95 billion is budgeted to be spent on defence, further eclipsing spending on health.Spending on the Police is budgeted to increase by 32 per cent, to N$1,28 billion in 2008-09.DEVELOPMENT Total development spending over the next three years is set to rise to almost N$10 billion, Kuugongelwa-Amadhila said.This is more than double the amount spent in the three-year period from 2004-05 to 2006-07, and will include N$3,5 billion that will be devoted mainly to road and railway construction, she said.Government’s total spending in 2008-09 is projected at N$22,464 billion – an increase of 26 per cent (N$4,6 billion) on the expenditure of N$17,8 billion that had been budgeted for the 2007-08 financial year.The spending will amount to 37,75 per cent of Namibia’s gross domestic product (GDP).With income of N$20,87 billion expected in 2008-09, a budget deficit of N$1,59 billion, amounting to 2,67 per cent of Namibia’s GDP, is forecast for the coming financial year.Spending is budgeted to decrease again by 3,18 per cent from the 2008-09 to 2009-10 financial years, with a small budget surplus of N$3,9 million now expected in 2009-10.A budget surplus of N$768 million is projected for the year after that.The plan to boost public spending in 2008-09 is a major deviation from the budget plans that Kuugongelwa-Amadhila announced in the National Assembly on March 15 last year.With last year’s national budget, it was projected that Government spending would total N$17,14 billion during the 2008-09 financial year.That figure would have amounted to 31,2 per cent of Namibia’s gross domestic product (GDP), and would have been 3,8 per cent less than the total spending of N$17,82 billion that was budgeted for in the 2007-08 financial year.DEBT DOWN It was further projected that in the 2009-10 financial year, Government would be spending N$17,52 billion, amounting to 29,7 per cent of Namibia’s GDP.It is now projected that Namibia’s State spending will amount to N$21,74 billion in the 2009-10 financial year, which will be N$4,2 billion (24 per cent) more than had been projected in last year’s budget, and will amount to 33,6 per cent of GDP.Kuugongelwa-Amadhila said Government’s finances had been turned around from the situation where a budget deficit of N$85 million was recorded in the 2005-06 financial year to one where a revised surplus of N$2,3 billion was realised in the year after that – compared to a surplus of N$921 that had been projected in the 2006-07 Additional Budget.This surplus is being used to reduce public debt, which, although it has continued to increase from N$12,7 billion at the end of March 2006 to N$3,6 billion at the end of the 2006-07 financial year a year later, has in that time declined as a percentage of GDP from 30,6 per cent to 28,3 per cent, she said.By July 2007, Namibia’s public debt had been reduced to N$11,7 billion, bringing it under the target of 25 per cent of GDP for the first time in six years, the Minister continued.In the current financial year, which ends at the end of March, Government’s income is again expected to exceed budget projections, with revenue projected to total N$19,5 billion compared to N$18,4 billion that had been estimated under the budget, Kuugongelwa-Amadhila said.SURPLUS With expenditure projected to be in line with the initial budget, the budget surplus of 1,1 per cent of GDP that had been projected last year now looks set to turn out significantly higher at 3,3 per cent of GDP, the Minister said.A Budget surplus of N$559 million was expected for 2007-08 in last year’s budget.According to Kuugongelwa-Amadhila’s new projection, a surplus of N$1,7 billion can be expected this financial year.”The amount of additional funds allocated in this year’s budget is unprecedented,” Kuugongelwa-Amadhila said.She added: “This was made possible by strong revenue growth and fiscal consolidation over the preceding two years.”Government’s spending plans for the next three years “carries a strong message of hope, because it ensures a vibrant economy that is anchored on sound macro-economic fundamentals,” she said.”It is indeed confirmation that we are on the right path and that we have good reason to be confident and optimistic about our future,” she continued.Kuugongelwa-Amadhila closed off her speech with a message to the citizens of Namibia: “You have shown great patience in the past when the belts had to be tightened to consolidate our public finances.We can now reap the fruits of our prudent fiscal management.””This Budget foresees one of the largest expansions since Independence, accelerating Namibia’s efforts to fight poverty, create employment and generate sustained economic growth,” Kuugongelwa-Amadhila said during her budget speech.”The main thrust of the Budget remains on combating persisting poverty and inequality in our country.The Government’s approach is a concerted effort to improve the social safety net to the most vulnerable and to enhance the standards of basic services,” she said.BENEFICIARIES War veterans, pensioners, people living on social grants, some State-owned enterprises, Namibia’s military and the development of the country’s infrastructure are some of the main beneficiaries of the financial generosity marking the newly unveiled budget.Kuugongelwa-Amadhila announced that old-age pensions will increase to N$450 a month – these are now N$370 a month – while war veterans will receive a monthly allowance of N$2 000 from now on.It is budgeted that over the next three years, N$2,3 billion will be spent on old-ag
e pensions, while N$785 million will be spent on grants paid to orphans and vulnerable children and N$512 million on war veterans’ allowances, the Minister said.SPENDING BOOSTED Government’s spending plans for the next three years also foresee total spending of N$6,4 billion on health and N$14 billion on education, maintaining these two areas as accounting for major portions of overall public spending.In the 2008-09 financial year, spending on health is to be increased by 26 per cent to N$2,1 billion, Kuugongelwa-Amadhila said.At N$4,7 billion, spending on education will be 29 per cent higher in 2008-09 than it had been in the 2007-08 financial year.It is planned to boost defence spending even more dramatically than spending on education and health, though.In 2008-09, N$2,3 billion is to be spent on defence – N$689 million more than the previous financial year.This represents an increase of 41 per cent in defence spending compared to the 2007-08 financial year.In 2008-09, Government will also for the first time spend more money on defence than it does on health.Over the next three years, a total of N$6,95 billion is budgeted to be spent on defence, further eclipsing spending on health.Spending on the Police is budgeted to increase by 32 per cent, to N$1,28 billion in 2008-09.DEVELOPMENT Total development spending over the next three years is set to rise to almost N$10 billion, Kuugongelwa-Amadhila said.This is more than double the amount spent in the three-year period from 2004-05 to 2006-07, and will include N$3,5 billion that will be devoted mainly to road and railway construction, she said.Government’s total spending in 2008-09 is projected at N$22,464 billion – an increase of 26 per cent (N$4,6 billion) on the expenditure of N$17,8 billion that had been budgeted for the 2007-08 financial year.The spending will amount to 37,75 per cent of Namibia’s gross domestic product (GDP).With income of N$20,87 billion expected in 2008-09, a budget deficit of N$1,59 billion, amounting to 2,67 per cent of Namibia’s GDP, is forecast for the coming financial year.Spending is budgeted to decrease again by 3,18 per cent from the 2008-09 to 2009-10 financial years, with a small budget surplus of N$3,9 million now expected in 2009-10.A budget surplus of N$768 million is projected for the year after that.The plan to boost public spending in 2008-09 is a major deviation from the budget plans that Kuugongelwa-Amadhila announced in the National Assembly on March 15 last year.With last year’s national budget, it was projected that Government spending would total N$17,14 billion during the 2008-09 financial year.That figure would have amounted to 31,2 per cent of Namibia’s gross domestic product (GDP), and would have been 3,8 per cent less than the total spending of N$17,82 billion that was budgeted for in the 2007-08 financial year.DEBT DOWN It was further projected that in the 2009-10 financial year, Government would be spending N$17,52 billion, amounting to 29,7 per cent of Namibia’s GDP.It is now projected that Namibia’s State spending will amount to N$21,74 billion in the 2009-10 financial year, which will be N$4,2 billion (24 per cent) more than had been projected in last year’s budget, and will amount to 33,6 per cent of GDP.Kuugongelwa-Amadhila said Government’s finances had been turned around from the situation where a budget deficit of N$85 million was recorded in the 2005-06 financial year to one where a revised surplus of N$2,3 billion was realised in the year after that – compared to a surplus of N$921 that had been projected in the 2006-07 Additional Budget.This surplus is being used to reduce public debt, which, although it has continued to increase from N$12,7 billion at the end of March 2006 to N$3,6 billion at the end of the 2006-07 financial year a year later, has in that time declined as a percentage of GDP from 30,6 per cent to 28,3 per cent, she said.By July 2007, Namibia’s public debt had been reduced to N$11,7 billion, bringing it under the target of 25 per cent of GDP for the first time in six years, the Minister continued.In the current financial year, which ends at the end of March, Government’s income is again expected to exceed budget projections, with revenue projected to total N$19,5 billion compared to N$18,4 billion that had been estimated under the budget, Kuugongelwa-Amadhila said.SURPLUS With expenditure projected to be in line with the initial budget, the budget surplus of 1,1 per cent of GDP that had been projected last year now looks set to turn out significantly higher at 3,3 per cent of GDP, the Minister said.A Budget surplus of N$559 million was expected for 2007-08 in last year’s budget.According to Kuugongelwa-Amadhila’s new projection, a surplus of N$1,7 billion can be expected this financial year.”The amount of additional funds allocated in this year’s budget is unprecedented,” Kuugongelwa-Amadhila said.She added: “This was made possible by strong revenue growth and fiscal consolidation over the preceding two years.”Government’s spending plans for the next three years “carries a strong message of hope, because it ensures a vibrant economy that is anchored on sound macro-economic fundamentals,” she said.”It is indeed confirmation that we are on the right path and that we have good reason to be confident and optimistic about our future,” she continued.Kuugongelwa-Amadhila closed off her speech with a message to the citizens of Namibia: “You have shown great patience in the past when the belts had to be tightened to consolidate our public finances.We can now reap the fruits of our prudent fiscal management.”