Proof of Main Budget will be in additional spending plans

FINANCE Minister Saara Kuugongelwa-Amadhila will need real results rather than ambitious plans of reining in Government spending to prove that she means business with clamping down on Namibia’s Budget deficit and growing national debt.

That appeared to be the consensus among financial analysts on Friday, when they briefed Members of Parliament on Government’s Main Budget for 2004-05, which the Finance Minister unveiled in the National Assembly on Wednesday. The briefing was organised by the Parliamentary Standing Committee on Economics, Natural Resources and Public Administration, together with the National Democratic Institute for International Affairs (NDI).Addressing a handful of parliamentarians, as well as representatives from financial institutions, parastatals, Government and the private sector, the Chief Executive Officer of Old Mutual Namibia, Johannes !Gawaxab, and Robin Sherbourne, Director of the Institute for Public Policy Research, both said that the real test for Kuugongelwa-Amadhila’s management of Government finances could be expected to come only later this year.That will be when she is expected to table the customary Additional Budget for the coming financial year.The Finance Minister announced last week that Government spending is projected to total N$12,69 billion in the financial year that runs from April 1 2004 to March 31 2005.That figure represents an increase of 3,6 per cent on the amount that Government expected to spend in the 2003-04 financial year, according to the Additional Budget that Kuugongelwa-Amadhila tabled in October 2003.According to the new Main Budget, it is also projected that Government’s income in the 2004-05 fiscal year will amount to N$12,1 billion, which is set to be 11,7 per cent more than the previous financial year’s revised income of N$10,8 billion that was forecast in the 2003-04 Additional Budget.At N$589 million, the expected resultant Budget shortfall will equal about 1,6 per cent of Namibia’s gross domestic product (GDP).If realised, this will be one of the lowest deficit levels to be recorded in Namibia since Independence.According to Sherbourne, the spending increase of 3,7 per cent would actually represent a year-on-year decrease, if the effects of inflation – expected to average about 6,5 per cent this year – are factored in.That showed that last week’s Budget was quite severe in trying to put limits on Government spending, he said.He added that the reduced deficit was “pretty ambitious”.He said that Kuugongelwa-Amadhila would have made much more of an impact if she had produced Namibia’s first balanced budget since Independence.That would have shown that this Finance Minister “means business and isn’t going to take” – and there Sherbourne paused for effect, before continuing – “from no-one”.”Now we are waiting for the Additional Budget,” he remarked.Also on the topic of the deficit, !Gawaxab stated: “The big challenge is really that 1,6 per cent.Is it really achievable? Is is realistic?” He noted that over the last seven years the deficit had averaged 3,25 per cent of GDP.The Additional Budget – and what level of deficit would be projected then, when it was closer to the end of the coming financial year – would show whether the Minister’s credibility would have been enhanced, or tarnished, by the deficit target she set last week, he said.!Gawaxab added that he estimated that Government would actually end up spending some N$300 million more in 2004-05 than was projected last week in what he described as a “conservative” budget.Sherbourne noted that three key fiscal targets that Government had set for itself in 2001 had all been overshot.Public spending was supposed to have been limited to no more than 30 per cent of GDP; the latest estimate for 2003-04 is that it amounted to 36,1 per cent.The deficit was supposed to be kept to three per cent of GDP; in 2003-04, it is estimated, it amounted to about 4,2 per cent of GDP.Public debt was supposed not to exceed 25 per cent of GDP, Sherbourne added.Yet Government’s debt was now projected to rise to a level that would be equivalent to 30,3 per cent of GDP when March comes to an end this week.”Very ambitious targets” had been set which, in the past, had been met only on a few occasions, and then rather by accident than by design, Sherbourne said.He asked: “Are we setting ourselves up for failure?” Members of the National Assembly might well be asking themselves, and each other, the same question, once debate on the Budget starts this Wednesday.The briefing was organised by the Parliamentary Standing Committee on Economics, Natural Resources and Public Administration, together with the National Democratic Institute for International Affairs (NDI).Addressing a handful of parliamentarians, as well as representatives from financial institutions, parastatals, Government and the private sector, the Chief Executive Officer of Old Mutual Namibia, Johannes !Gawaxab, and Robin Sherbourne, Director of the Institute for Public Policy Research, both said that the real test for Kuugongelwa-Amadhila’s management of Government finances could be expected to come only later this year.That will be when she is expected to table the customary Additional Budget for the coming financial year.The Finance Minister announced last week that Government spending is projected to total N$12,69 billion in the financial year that runs from April 1 2004 to March 31 2005.That figure represents an increase of 3,6 per cent on the amount that Government expected to spend in the 2003-04 financial year, according to the Additional Budget that Kuugongelwa-Amadhila tabled in October 2003.According to the new Main Budget, it is also projected that Government’s income in the 2004-05 fiscal year will amount to N$12,1 billion, which is set to be 11,7 per cent more than the previous financial year’s revised income of N$10,8 billion that was forecast in the 2003-04 Additional Budget.At N$589 million, the expected resultant Budget shortfall will equal about 1,6 per cent of Namibia’s gross domestic product (GDP).If realised, this will be one of the lowest deficit levels to be recorded in Namibia since Independence.According to Sherbourne, the spending increase of 3,7 per cent would actually represent a year-on-year decrease, if the effects of inflation – expected to average about 6,5 per cent this year – are factored in.That showed that last week’s Budget was quite severe in trying to put limits on Government spending, he said.He added that the reduced deficit was “pretty ambitious”.He said that Kuugongelwa-Amadhila would have made much more of an impact if she had produced Namibia’s first balanced budget since Independence.That would have shown that this Finance Minister “means business and isn’t going to take” – and there Sherbourne paused for effect, before continuing – “from no-one”.”Now we are waiting for the Additional Budget,” he remarked.Also on the topic of the deficit, !Gawaxab stated: “The big challenge is really that 1,6 per cent.Is it really achievable? Is is realistic?” He noted that over the last seven years the deficit had averaged 3,25 per cent of GDP.The Additional Budget – and what level of deficit would be projected then, when it was closer to the end of the coming financial year – would show whether the Minister’s credibility would have been enhanced, or tarnished, by the deficit target she set last week, he said.!Gawaxab added that he estimated that Government would actually end up spending some N$300 million more in 2004-05 than was projected last week in what he described as a “conservative” budget.Sherbourne noted that three key fiscal targets that Government had set for itself in 2001 had all been overshot.Public spending was supposed to have been limited to no more than 30 per cent of GDP; the latest estimate for 2003-04 is that it amounted to 36,1 per cent.The deficit was supposed to be kept to three per cent of GDP; in 2003-04, it is estimated, it amounted to about 4,2 per cent of GDP.Public debt was supposed not to exceed 25 per cent of GDP, Sherbourne added.Yet Government’s
debt was now projected to rise to a level that would be equivalent to 30,3 per cent of GDP when March comes to an end this week.”Very ambitious targets” had been set which, in the past, had been met only on a few occasions, and then rather by accident than by design, Sherbourne said.He asked: “Are we setting ourselves up for failure?” Members of the National Assembly might well be asking themselves, and each other, the same question, once debate on the Budget starts this Wednesday.