Budget: ‘Tough compromises’

TIGHTENING the country’s purse strings is the main aim of this year’s National Budget, says Finance Minister Saara Kuugongelwa-Amadhila.

Delivering her maiden Main Budget speech in the National Assembly yesterday, the Minister said the next financial year would be about “tough compromises”. Containing the country’s domestic debt and cutting down on national expenditure are set as the major focus of the State Budget for 2004-05.”There are hard choices to be made.The next financial year will be a challenge because finances are tight, but it is also an opportunity for us to learn to manage our scarce resources more effectively and efficiently,” Kuugongelwa-Amadhila said.The country’s debt is expected to reach 30,3 per cent of gross domestic product (GDP) by the end of this month, representing a significant increase from the preceding year when it stood at 25,2 per cent.The situation is expected to worsen by the end of 2005, when national debt is expected to soar to 32 per cent of GDP.Nine per cent of this financial year’s Budget will be spent on paying interest on the country’s debt.A “persistent domestic Budget deficit” and foreign loans to fund development projects were singled out as the main contributors to the country’s mounting debt.Total expenditure at the end of the 2003-04 financial year is expected to reach 35 per cent of GDP, up one percentage from 2002-03.This has been attributed to personnel expenditure that has increased by more than 10 per cent during the past year compared to eight per cent the previous year.”This trend of overall expenditure should be reversed if Government expenditure is to remain sustainable,” cautioned the Finance Minister.While impressing the need to be more prudent, Kuugongelwa-Amadhila told parliamentarians that this was not expected to be done at the cost of development.Tackling poverty, addressing health and social issues, improving educational standards and developing infrastructure were identified as major challenges for the country.But, Kuugongelwa-Amadhila added, the results from public expenditure had to be measurable in terms of social and economic outcomes.BATTLE OF THE BULGETo curb over-expenditure, State departments were expected to reduce spending on overtime, goods and services.All vacancies in the civil service, with the exception of posts deemed essential, would be frozen.”These amendments reflect the need for caution – not spending the gains we have made through efficiency savings and reduced inflation,” said Kuugongelwa-Amadhila.In future, Government also intends to clamp down on easy borrowing terms for parastatals and levies are to be charged on loan guarantees.Parastatals will have to obtain authorisation from Government before taking loans.Among new provisions set out in the new Sovereign Debt Management Strategy, State offices, ministries and agencies will only be permitted to consider a foreign loan if the project is considered a priority within the National Development Plan.As has become customary, the Basic Education Ministry received the lion’s share of the Budget – with a marginal drop of two per cent compared to the preceding year.It is followed by the Health Ministry which receives a slight increase, about one per cent.The Defence and Finance Ministries, who are next in line to receive the largest chunks of the budget, see their budgets slashed minimally.Containing the country’s domestic debt and cutting down on national expenditure are set as the major focus of the State Budget for 2004-05.”There are hard choices to be made.The next financial year will be a challenge because finances are tight, but it is also an opportunity for us to learn to manage our scarce resources more effectively and efficiently,” Kuugongelwa-Amadhila said.The country’s debt is expected to reach 30,3 per cent of gross domestic product (GDP) by the end of this month, representing a significant increase from the preceding year when it stood at 25,2 per cent.The situation is expected to worsen by the end of 2005, when national debt is expected to soar to 32 per cent of GDP.Nine per cent of this financial year’s Budget will be spent on paying interest on the country’s debt.A “persistent domestic Budget deficit” and foreign loans to fund development projects were singled out as the main contributors to the country’s mounting debt.Total expenditure at the end of the 2003-04 financial year is expected to reach 35 per cent of GDP, up one percentage from 2002-03.This has been attributed to personnel expenditure that has increased by more than 10 per cent during the past year compared to eight per cent the previous year.”This trend of overall expenditure should be reversed if Government expenditure is to remain sustainable,” cautioned the Finance Minister.While impressing the need to be more prudent, Kuugongelwa-Amadhila told parliamentarians that this was not expected to be done at the cost of development.Tackling poverty, addressing health and social issues, improving educational standards and developing infrastructure were identified as major challenges for the country.But, Kuugongelwa-Amadhila added, the results from public expenditure had to be measurable in terms of social and economic outcomes.BATTLE OF THE BULGETo curb over-expenditure, State departments were expected to reduce spending on overtime, goods and services.All vacancies in the civil service, with the exception of posts deemed essential, would be frozen.”These amendments reflect the need for caution – not spending the gains we have made through efficiency savings and reduced inflation,” said Kuugongelwa-Amadhila.In future, Government also intends to clamp down on easy borrowing terms for parastatals and levies are to be charged on loan guarantees.Parastatals will have to obtain authorisation from Government before taking loans.Among new provisions set out in the new Sovereign Debt Management Strategy, State offices, ministries and agencies will only be permitted to consider a foreign loan if the project is considered a priority within the National Development Plan.As has become customary, the Basic Education Ministry received the lion’s share of the Budget – with a marginal drop of two per cent compared to the preceding year.It is followed by the Health Ministry which receives a slight increase, about one per cent.The Defence and Finance Ministries, who are next in line to receive the largest chunks of the budget, see their budgets slashed minimally.