Government to support a cautious fiscal policy

NAMIBIA is currently aiming at keeping a sustainable fiscal path, so as to be able to achieve its target of limiting the debt stock and at the same time achieve its development objectives.

Minister of Finance Saara Kuugongelwa-Amadhila said the Government intended to restrict expenditure over the short-term in order to bring the current debt stock under control, which in turn would ensure for a sound platform for future economic growth and development. “We are also introducing a Sovereign Debt Management Strategy to address the risks associated with a higher debt stock and ensure that all foreign loans are properly budgeted for.”By getting our house in order today, we will be able to pursue a more expansionary and growth orientated fiscal policy in future.The alternative, which involves ignoring the rising debt level and allowing Namibia to fall into a debt trap, is simply not an option.”Kuugongelwa-Amadhila was speaking on the eroding effects of budget deficits at the two-day Economist Business Forum held in Windhoek this week.In the 2003/04 financial-year the budget deficit exceeded four per cent of gross domestic product (GDP) and the national debt stock reached a level slightly below 30 per cent of GDP.The minister said large and persistent deficits would deter both local and foreign investment and create concerns about inflation, expectations of lower expenditure on public infrastructure and fears of a possible fiscal crisis or debt default.According to Kuugongelwa-Amadhila although the majority of the national debt has been accumulated over the last 14 years; she attributed the larger than expected deficit to external shocks on the revenue side, in particular to diamond tax revenues, which were negatively affected by the strength of the Namibian dollar.She said although Government expenditure would be restricted, public expenditure management would in turn improve so that development and infrastructure programmes would continue receiving support.Policies reflected in the Performance and Effectiveness Management Programme and Medium Term Plans, have been designed to target expenditure towards programmes that would deliver results.”We need to change the transitional mindset of incremental budgeting.Instead we should ensure that all public expenditure is justified on the basis that it will deliver real and lasting improvements to social or economic outcomes.”Kuugongelwa-Amadhila also said in 2003/04 total interest payments reached three per cent of GDP, which she said implies that for Namibia, while not yet in a debt trap, the warning signs are on that something needs to be done about the country’s deficit and debt levels.”We are also introducing a Sovereign Debt Management Strategy to address the risks associated with a higher debt stock and ensure that all foreign loans are properly budgeted for.”By getting our house in order today, we will be able to pursue a more expansionary and growth orientated fiscal policy in future.The alternative, which involves ignoring the rising debt level and allowing Namibia to fall into a debt trap, is simply not an option.”Kuugongelwa-Amadhila was speaking on the eroding effects of budget deficits at the two-day Economist Business Forum held in Windhoek this week.In the 2003/04 financial-year the budget deficit exceeded four per cent of gross domestic product (GDP) and the national debt stock reached a level slightly below 30 per cent of GDP.The minister said large and persistent deficits would deter both local and foreign investment and create concerns about inflation, expectations of lower expenditure on public infrastructure and fears of a possible fiscal crisis or debt default.According to Kuugongelwa-Amadhila although the majority of the national debt has been accumulated over the last 14 years; she attributed the larger than expected deficit to external shocks on the revenue side, in particular to diamond tax revenues, which were negatively affected by the strength of the Namibian dollar.She said although Government expenditure would be restricted, public expenditure management would in turn improve so that development and infrastructure programmes would continue receiving support.Policies reflected in the Performance and Effectiveness Management Programme and Medium Term Plans, have been designed to target expenditure towards programmes that would deliver results.”We need to change the transitional mindset of incremental budgeting.Instead we should ensure that all public expenditure is justified on the basis that it will deliver real and lasting improvements to social or economic outcomes.”Kuugongelwa-Amadhila also said in 2003/04 total interest payments reached three per cent of GDP, which she said implies that for Namibia, while not yet in a debt trap, the warning signs are on that something needs to be done about the country’s deficit and debt levels.