Mixed reaction to budget surplus

THERE has been a mixed response among economists to the additional budget tabled by Finance Minister Saara Kuugongelwa-Amadhila this week.

Martin Mwinga, portfolio manager at Rand Merchant Bank, a sister company to First National Bank, yesterday decribed the budgetary surplus of N$921 million as a positive development but felt it would be short-lived because of pressure on the economy. “It would be better to use the surplus to pay off Government debt, but the Finance Minister chose to show a surplus,” Mwinga told The Namibian.”Namibia derives about 35 per cent of its revenue from the Southern African Customs Union (Sacu) but that will decrease over the next few years because the Free Trade Area (FTA) will be established by 2008 and customs tariffs will be reduced,” Mwinga added.The envisaged customs union for the 14 member states of the Southern African Development Community (SADC) would further reduce the revenue cake.”This will put pressure on Namibia’s economy,” Mwinga reiterated.”Minister Saara Kuugongelwa-Amadhila however pointed out during the main budget presentation that the next financial year would show a deficit again.”Mwinga further noted that the world economy was slowing down and demand for minerals would be reduced as a result.”Mineral exports from Namibia are likely to decline and since our country’s economy is not very diversified, this development might affect it negatively.”Economist Emile van Zyl of Simonis Storm Securities told The Namibian that the N$648 million from the sale of a 34 per cent stake in Mobile Telecommunications (MTC) to a Portuguese company should have rather been used for development projects or, like Mwinga noted, to pay off debt.”It is also not clear if the re-allocation of funds was taken from capital expenditure to finance current expenditure,” Van Zyl said.”The Finance Ministry might have good reasons for this, but it lacks a bit of transparency.”Dr Klaus Schade of the Namibia Economic Policy Research Unit (Nepru) welcomed the surplus.”It is a sign that the efforts of the Finance Ministry to collect revenue from all eligible taxpayers are showing positive results.”Schade felt that the revenue from Sacu would not necessarily be reduced.”The four smaller member states like Botswana, Namibia, Lesotho and Swaziland have very little trade with SADC countries and even if tariffs get lowered when the Free Trade Area comes into operation, I don’t foresee reduced income for Namibia.”Schade was optimistic that Sacu revenue might remain at more or less the same level.”South Africa as the largest Sacu member state will import a lot of goods to be used for infrastructure projects with regard to the soccer World Cup in 2010.”The economist said that the additional N$80 million for the Government medical aid scheme might be followed by more allocations because of the increasing costs of HIV-AIDS treatment.”The monthly membership fees for civil servants are minimal and Government might have to think of increasing the fees or even adjusting the fees according to the salary scale,” Schade said.”It would be better to use the surplus to pay off Government debt, but the Finance Minister chose to show a surplus,” Mwinga told The Namibian.”Namibia derives about 35 per cent of its revenue from the Southern African Customs Union (Sacu) but that will decrease over the next few years because the Free Trade Area (FTA) will be established by 2008 and customs tariffs will be reduced,” Mwinga added.The envisaged customs union for the 14 member states of the Southern African Development Community (SADC) would further reduce the revenue cake.”This will put pressure on Namibia’s economy,” Mwinga reiterated.”Minister Saara Kuugongelwa-Amadhila however pointed out during the main budget presentation that the next financial year would show a deficit again.”Mwinga further noted that the world economy was slowing down and demand for minerals would be reduced as a result.”Mineral exports from Namibia are likely to decline and since our country’s economy is not very diversified, this development might affect it negatively.”Economist Emile van Zyl of Simonis Storm Securities told The Namibian that the N$648 million from the sale of a 34 per cent stake in Mobile Telecommunications (MTC) to a Portuguese company should have rather been used for development projects or, like Mwinga noted, to pay off debt.”It is also not clear if the re-allocation of funds was taken from capital expenditure to finance current expenditure,” Van Zyl said.”The Finance Ministry might have good reasons for this, but it lacks a bit of transparency.”Dr Klaus Schade of the Namibia Economic Policy Research Unit (Nepru) welcomed the surplus.”It is a sign that the efforts of the Finance Ministry to collect revenue from all eligible taxpayers are showing positive results.”Schade felt that the revenue from Sacu would not necessarily be reduced.”The four smaller member states like Botswana, Namibia, Lesotho and Swaziland have very little trade with SADC countries and even if tariffs get lowered when the Free Trade Area comes into operation, I don’t foresee reduced income for Namibia.”Schade was optimistic that Sacu revenue might remain at more or less the same level.”South Africa as the largest Sacu member state will import a lot of goods to be used for infrastructure projects with regard to the soccer World Cup in 2010.”The economist said that the additional N$80 million for the Government medical aid scheme might be followed by more allocations because of the increasing costs of HIV-AIDS treatment.”The monthly membership fees for civil servants are minimal and Government might have to think of increasing the fees or even adjusting the fees according to the salary scale,” Schade said.

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