Cautious Budget expected

THIS year’s Budget is not expected to tilt towards “the masses” despite it being an election year, according to analysts.

Finance Minister Saara Kuugongelwa-Amadhila is scheduled to table the Budget for the 2004-05 financial year in Parliament this afternoon. Analysts do not anticipate that the Minister will announce major tax benefits because of low revenue growth, especially from the mining sector which has been negatively affected by the strengthening of the Namibia dollar against the US dollar.Economists are also not predicting major surprises in terms of policy.Government is, however, expected to increase its capital expenditure to boost investment in Namibia’s physical infrastructure and its industrial capacity.”Allocation to social services such as old age pensions and orphans will stay the same… no increased budget should also be expected for land reform though it is an election year,” said Klaus Schade of the Namibia Economic Policy Research Unit (Nepru).”The main challenge for the Minister (of Finance) is to balance revenue with expenditure.She cannot cut taxes because we already expect less tax [revenue] from the mining sector,” Schade said.Ngoni Bopoto of Simonis Storm Securities did not predict “major structural changes or drastic announcements” but speculated that some of the overdue Capital Gain taxes recommended by the Namibian Tax Consortium in 2002 could be implemented in the 2004-2005 fiscal year.Among proposed taxes on capital expected to to be implemented during the coming financial year are the Donation Tax and special deemed Capital Profits.”The Namibia dollar will remain relatively strong and the negative impact on the mining and fishing industries will continue.Growth in tax will be flat,” Simonis Storm Securities said.The survival of the two sectors would, however, be ensured by global economic growth, which “though very vulnerable”, had picked up and would continue to do so in the next 12 months.The company expects local demand for goods and services to increase because of low inflation and continued low interest rates.Uahatjiri ‘Banda’ Ngaujake of Namibia Equity Brokers, while agreeing that the elections might play little role in this year’s Budget, expects “sizable” allocations to some social sectors.”I think there will be increased expenditure on the acquisition of commercial land in light of Government’s recent announcement that it will expropriate farms,” Ngaujake said.He also expects the Ministry of Health and Social Service to be allocated more money for the “full implementation of the anti-retroviral (ARV) programme”.Ngaujake also predicts more defence spending because of Namibia’s involvement in the UN peace-keeping mission in Liberia.”An increment in old age pensions is also long overdue, and surely there should be something for black economic empowerment because they [Government] recently set up a committee to come up with the policy framework on the issue,” the NEB analyst said.Ngaujake expressed concern over the Budget deficit and what he termed “Government’s bottomless awards to non-performing parastatals”.”Our Budget deficit is expected to reach the red line of four per cent of the GDP… it seems we can’t get it under control and something seriously has to be done,” Njaujake said.On parastatals he said: “So much money is being pumped into them, but nothing seems to improve… how long will this situation continue?”Analysts do not anticipate that the Minister will announce major tax benefits because of low revenue growth, especially from the mining sector which has been negatively affected by the strengthening of the Namibia dollar against the US dollar.Economists are also not predicting major surprises in terms of policy.Government is, however, expected to increase its capital expenditure to boost investment in Namibia’s physical infrastructure and its industrial capacity.”Allocation to social services such as old age pensions and orphans will stay the same… no increased budget should also be expected for land reform though it is an election year,” said Klaus Schade of the Namibia Economic Policy Research Unit (Nepru).”The main challenge for the Minister (of Finance) is to balance revenue with expenditure.She cannot cut taxes because we already expect less tax [revenue] from the mining sector,” Schade said.Ngoni Bopoto of Simonis Storm Securities did not predict “major structural changes or drastic announcements” but speculated that some of the overdue Capital Gain taxes recommended by the Namibian Tax Consortium in 2002 could be implemented in the 2004-2005 fiscal year.Among proposed taxes on capital expected to to be implemented during the coming financial year are the Donation Tax and special deemed Capital Profits.”The Namibia dollar will remain relatively strong and the negative impact on the mining and fishing industries will continue.Growth in tax will be flat,” Simonis Storm Securities said.The survival of the two sectors would, however, be ensured by global economic growth, which “though very vulnerable”, had picked up and would continue to do so in the next 12 months.The company expects local demand for goods and services to increase because of low inflation and continued low interest rates.Uahatjiri ‘Banda’ Ngaujake of Namibia Equity Brokers, while agreeing that the elections might play little role in this year’s Budget, expects “sizable” allocations to some social sectors.”I think there will be increased expenditure on the acquisition of commercial land in light of Government’s recent announcement that it will expropriate farms,” Ngaujake said.He also expects the Ministry of Health and Social Service to be allocated more money for the “full implementation of the anti-retroviral (ARV) programme”.Ngaujake also predicts more defence spending because of Namibia’s involvement in the UN peace-keeping mission in Liberia.”An increment in old age pensions is also long overdue, and surely there should be something for black economic empowerment because they [Government] recently set up a committee to come up with the policy framework on the issue,” the NEB analyst said.Ngaujake expressed concern over the Budget deficit and what he termed “Government’s bottomless awards to non-performing parastatals”.”Our Budget deficit is expected to reach the red line of four per cent of the GDP… it seems we can’t get it under control and something seriously has to be done,” Njaujake said.On parastatals he said: “So much money is being pumped into them, but nothing seems to improve… how long will this situation continue?”