Govt loans squeeze budget

The government has indicated it is spending an additional N$1,7 billion to pay interest on its loans for the 2023/24 fiscal year.

If not kept in check, loans would soon take priority over key social expenses, and even healthcare, minister of finance and public enterprises Iipumbu Shiimi said yesterday, as he tabled the country’s midterm budget review in Windhoek.

He said total expenditure has been increased by N$2,5 billion, much of which would be swallowed up by interest payments.

“Interest payments are revised upwards by N$1,7 billion to N$11,8 billion in the 2023/24 fiscal year, equivalent to 15% of projected revenue for the year,” Shiimi said, adding this would be unsustainable and needs to be kept in check.

“Debt servicing costs continue to absorb an increasing portion of the resource envelope, now exceeding expenditure on key social services such as health and social protection,” he said.

For this fiscal year, Shiimi said total national debt is expected to reach N$153,8 billion, and was already at N$149,3 billion at the end of September, equivalent to 64,1% of national output.

Upped by N$2,5 billion, the total budget will now be at N$88,9 billion, and as a consequence will also push up the budget deficit of N$579 million in nominal terms.

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Although the budget adjustment was only N$2,5 billion, Shiimi indicated that additional expenditure requests to the tune of N$5,3 billion were received for consideration.

This means other expenditures have been excluded.

While expenses were upped, the treasury has also raised an upward revision for the budgeted revenue outturn by N$3,8 billion.

This is based on observed strong revenue performance, Shiimi said, attributable to positive economic activities.
He said the economy would grow by 3,5% this year.

“Despite high global inflation and the resultant tight financial conditions, the Namibian economy is outperforming some of its peers,” he said.

BAILOUTS

After much blame was placed on the government by TransNamib for its lack of supporting funds, the government has extended the company N$230 million.

Shiimi said the government has also guaranteed loans to the Meat Corporation of Namibia and the Seaflower Group of Companies (National Fishing Corporation of Namibia) to the tune of N$602,8 million, which has upped the fiscal risks of the state.

He said the Public Service Medical Aid Scheme (Psemas) got an additional N$200 million “to meet an anticipated deficit”.
During the budget speech, Psemas was allocated N$2,7 billion already.

The Namibia Student Financial Assistance Fund (NSFAF) has been allocated an additional N$376,3 million.

The head of the fund, Kennedy Kandume, earlier this year said it needs about N$2 billion annually to sustain itself.

The Ministry of Health and Social Services will receive an additional N$290 million, with N$40 million set aside for a “special fund for uncommon diseases”.

“N$250 million to supplement the pharmaceutical budget at the Ministry of Health and Social Services,” the minister said.
The Directorate of Legal Aid in the Ministry of Justice will get N$25 million to cover escalating legal costs.

Earlier this year, justice minister Yvonne Dausab said the directorate is experiencing a staff shortage, delaying trials.

The Ministry of Environment, Forestry and Tourism is set to receive N$17 million to support its anti-poaching ambitions.

Recent statistics show that poaching is on the increase in Namibia, with the number of rhinos poached in the country in 2022 almost doubling to 87 from 45 in 2021.

Moreover, the Office of the Prime Minister has to cover food distribution as well as support to affected farmers with an additional N$643 million for drought relief.

“Going forward, the Office of the Prime Minister has started piloting an alternative drought-relief delivery mechanism through utilising vouchers, so as to minimise the associated administrative costs, consequently creating an opportunity to make more food available to vulnerable people,” Shiimi announced.

The Ministry of International Relations and Cooperation got an additional N$23,3 million, with the Ministry of Defence and Veterans Affairs being allocated N$42,8 million – apart from the N$79,6 million going to veterans affairs.

The Ministry of Education, Arts and Culture is allocated an additional N$129 million “to expedite the construction of classrooms countrywide”.

The Ministry of Home Affairs, Immigration, Safety and Security was given N$37,8 million extra, and the budget of the Office of the President was upgraded with N$14 million.

The Ministry of Sport, Youth and National Service gets an increase of N$14,5 million.

CUTS

The Ministry of Information and Communication Technology is the biggest loser, with a reduction of N$37 million in its budget, followed by the National Assembly’s budget, which is chopped by N$641 million.

The budget of the Ministry of Industrialisation and Trade was reduced by N$20 million, the Ministry of Works and Transport by N$14 million, and the Ministry of Mines and Energy with N$10 million.

The allocation to the Ministry of Fisheries and Marine Resources was cut by N$4 million.

TAX REFORMS

The Ministry of Finance and Public Enterprises has established a Tax Policy Unit in the Department of Economic Policy for the purpose of reviewing the current tax regime.

As a result, the unit has developed a catalogue of potential areas for tax reforms to be implemented over the medium term.

Some of these reforms include a reduction of the non-mining company tax rate by 2% over the next two years to 31% effective from April 2024, and a further reduction to 30% in April 2025.

Another reform is an increase in the threshold for individual income tax from the current N$50 000 to N$100 000.

This was done to provide relief to low-income earners.

Shiimi said adjustments would be made to personal income tax tables to effect this proposal.

The ministry has also introduced an internship tax incentive programme, aimed at incentivising employers to enrol more interns by providing an additional corporate tax deduction with the total financial implication for the government estimated at N$126 million.

Economist Rowland Brown yesterday praised the initiative.
“We need much more of this,” he said.

‘DISAPPOINTED’

Popular Democratic Movement (PDM) parliamentarian Maximalliant Katjimune yesterday expressed disappointment in the lack of priority given to key industries such as agriculture, water and land reform, small and medium enterprises, and youth development.

“We have consistently called for the government to pump money into these industries, but our cries have fallen on deaf ears,” he said.

Katjimune also raised concern over the rising levels of public debt.

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