FINANCE minister Calle Schlettwein made financial discipline and control a theme of his mid-year budget review yesterday – but the figures in government’s revised spending plans for the 2017/18 fiscal year tell a different story of increased spending, a deficit substantially bigger than initially expected, and ballooning national debt.
The revised budget that Schlettwein unveiled in the National Assembly provides for projected government spending of N$66,1 billion during the 2017/18 financial year, total government income of N$56,7 billion, and a resulting deficit of N$9,37 billion.
The revised spending will be about N$3,5 billion more than the total expenditure of N$62,5 billion projected in the government’s initial budget for 2017/18, and will see the shortfall between government income and expenditure increase by more than 50%, from an initially projected N$6,1 billion (amounting to 3,6% of Namibia’s gross domestic product) to N$9,3 billion (5,3% of GDP).
At the same time, total government debt is expected to reach N$74,2 billion during 2017/18 – compared to total debt of N$71,6 billion that was expected in the main budget that Schlettwein tabled in parliament in March.
A larger deficit and higher government debt will also result in increased spending on debt interest payments. In the initial budget of 2017/18 debt interest payments were projected to total N$5 billion this year. That figure has been revised to N$4,9 billion, but next year debt interest payments are projected to rise to N$6 billion – N$1,7 billion more than previously projected – and in 2019/20 it is expected to increase further, to N$6,9 billion (N$3,8 billion more than initially budgeted).
“Fiscal consolidation” was a recurring theme of the finance minister’s budget review speech yesterday.
In the wake of steep spending cuts that were announced in the mid-year budget review last year, a recalibration of government’s fiscal consolidation policy was needed to avert prolonged negative effects on economic growth and reversals in the delivery of essential services, Schlettwein said.
After growth of 6% in 2015, Namibia’s economy expanded by only 1,1% last year and is expected to grow by 1,6% this year, he said, cautioning that subdued economic growth increased the risks faced on the revenue side of the government’s budget, and that these risks would remain material over the next three years.
The fiscal policy stance over the coming three years would be aimed at entrenching financial sustainability through a balanced fiscal consolidation programme, providing financial support to the “fledgling” economic growth, and contributing to the achievement of socio-economic objectives set out in the Harambee Prosperity Plan and Vision 2030, Schlettwein said.
In particular, he added, government aims to gradually reduce the threshold of state spending as a ratio of GDP from 40% to 30%, and to reduce the budget deficit from 5% of GDP to below 3%.
With public debt expected to peak at 44,2% of GDP in 2019/20, when it is projected to total N$86,2 billion, government’s aim is also to bring the debt within a threshold of 35% of GDP in the long term, Schlettwein said.
Over the next three years, total government spending of N$64,5 billion is projected in 2018/19, N$65,5 billion in 2019/20, and N$66,9 billion in 2020/21, Schlettwein also said.
A budget shortfall of N$7,8 billion (4,2% of GDP) is projected for the 2018/19 financial year, decreasing to N$5,7 billion (2,9% of GDP) in 2019/20, and declining further to N$4,4 billion (2,1% of GDP) in 2020/21.
With the national debt expected to increase to N$89,2 billion in 2020/21, government’s budget plans include debt interest payments of N$7,2 billion that year.
The additional spending projected in the revised budget for 2017/18 includes an amount of about N$2,2 billion to settle outstanding invoices dating from the previous financial year, Schlettwein said.
It also includes an additional allocation of N$899 million to basic education, N$807 million to higher education, specifically for the University of Namibia, the Namibia University of Science and Technology, the Namibia Students Financial Assistance Fund, and the Namibia Qualifications Authority, and N$100 million for the Ministry of Health and Social Services, to cater for pharmaceuticals and personnel expenditure, Schlettwein said.
The Ministry of Safety and Security is set to receive an additional N$150 million for operational expenses, the Ministry of Defence is allocated an extra N$100 million to meet long-term contractual obligations, and the Ministry of Works and Transport is to receive N$130 million to cater for office rental costs, the minister said.
