Saara’s balancing act

A “PRO-POOR, pro-growth Budget”. And, for the first time since Namibia’s Independence, a balanced one. This is what Finance Minister Saara Kuugongelwa-Amadhila yesterday told the National Assembly she will deliver to Namibia during the 2006-07 financial year.

If the Finance Minister’s projections for Namibia’s State finances over the coming year hold true, Government’s financial books will not only balance but will also show a Budget surplus for the first time since Independence. Namibia’s State finances are in for a financial roller-coaster ride of sharp, sudden ups, followed by equally steep downs, however.By the next financial year after the coming surplus year, the State’s finances will slip back into a deficit, which Kuugongelwa-Amadhila undertook to try to keep under tight control.The projected surplus for the 2006-07 financial year, which starts from the beginning of April, is based on projections of a large surge in Government income in the coming year.At the same time, Government will boost its spending over the next year, before again cutting it back sharply in the 2007-08 financial year, and then, in the year after that, again increasing it at a much smaller rate than in this year’s Budget.”The last Budget focused on prudent fiscal management and the need to contain public debt within sustainable and affordable levels,” Kuugongelwa-Amadhila said at the start of her Budget speech.Policies that were aimed at bringing down budget deficits and the country’s debt total have yielded the desired results, and because of this, Government was in a position to adjust its financial management strategies.”The current situation, therefore, determines that we have to continue with fiscal prudence, but that we must at the same time engage in activities that grow the economy,” she said.A RURAL PRIORITY The Budget for 2006-07 “places emphasis on economic growth which is pro-poor”, she said.”High priority is given to the development of the rural areas, where most of the poor reside,” she told the Assembly.”Growth is promoted through improved resource allocations for the development of infrastructure such as roads and rails, schools, health facilities, water and electricity.This will improve the living standards of communities in these rural areas through the creation of jobs during construction and access to markets and services needed for economic advancement.We are also allocating more resources to welfare programmes that target the most vulnerable.”On this score, she announced that State pensions will be increased by N$70, from the current N$300 a month to N$370, in the 2006-07 fiscal year.”This Budget is a pro-poor, pro-growth Budget,” Kuugongelwa-Amadhila stated.In last year’s National Budget, the Finance Minister projected a Budget surplus of N$511,8 million for the coming year.Yesterday, Kuugongelwa-Amadhila revised that figure down to a surplus of N$114 million – although it is stated as N$122 million in the main Budget document setting out Government’s budgeted revenue and expenditure for 2006-07.Government plans to spend N$15,155 billion in 2006-07, which would be an 18,6 per cent increase on the total spending of N$12,772 billion budgeted for in 2005-06.At the same time, the Ministry of Finance is expecting an even stronger surge in State income during the 2006-07 financial year.Whereas Government income totalling N$12,354 billion was budgeted for in the 2005-06 fiscal year, this is forecast to swell by 23,6 per cent to a level of N$15,277 billion in the 2006-07 financial year.Kuugongelwa-Amadhila attributed this spike in income to “favourable developments on the revenue side, as a result of improved collections and higher earnings from the (Southern African Customs Union) pool”.DROP IN INCOME Namibia is expected to earn some N$6,1 billion from Sacu in 2006-07, which is a massive increase of 65 per cent on the income of N$3,7 billion from that source in the 2005-06 financial year.By the 2007-08 financial year, Sacu income is budgeted to be lower again at some N$4,5 billion.This will contribute to an expected fall of 8,5 per cent in Government income between the 06-07 and 07-08 fiscal years, the Budget document shows.From the 2006-07 year’s projected level of N$15,277 billion, Government income will decrease to N$13,98 billion in the next year.At the same time, spending is projected to be cut again after this year’s 18,6 per cent ballooning, to a level of N$14,7 billion in 2007-08.That will leave Namibia with a deficit of N$747 million, amounting to 1,6 per cent of Gross Domestic Product, in 2007-08.In the year after that, a deficit of N$1,13 billion, or 2,5 per cent of GDP, is projected.Those deficits would remain within Government’s target of keeping the country’s Budget shortfall below three per cent of GDP, Kuugongelwa-Amadhila said.At around 33 per cent of GDP, the country’s total debt level will however remain above the target limit of 30 per cent of GDP.Kuugongelwa-Amadhila once again – as in previous years’ Budget speeches by her and her predecessors in the Finance post – issued a warning about the dangers of continuing to run Budget deficits and increasing the country’s debt load.”While Government may consider borrowing additional funds to invest in projects that will yield returns in the future, one should remain cautious about falling in a debt trap and bear in mind the burden that debt puts on future generations,” she said.”Our daughters, sons and grandchildren will feel the effects of the ever-increasing debt burden that we are placing on them.Responsibility must, therefore, guide our design of fiscal policy.”Namibia’s State finances are in for a financial roller-coaster ride of sharp, sudden ups, followed by equally steep downs, however. By the next financial year after the coming surplus year, the State’s finances will slip back into a deficit, which Kuugongelwa-Amadhila undertook to try to keep under tight control.The projected surplus for the 2006-07 financial year, which starts from the beginning of April, is based on projections of a large surge in Government income in the coming year.At the same time, Government will boost its spending over the next year, before again cutting it back sharply in the 2007-08 financial year, and then, in the year after that, again increasing it at a much smaller rate than in this year’s Budget.”The last Budget focused on prudent fiscal management and the need to contain public debt within sustainable and affordable levels,” Kuugongelwa-Amadhila said at the start of her Budget speech.Policies that were aimed at bringing down budget deficits and the country’s debt total have yielded the desired results, and because of this, Government was in a position to adjust its financial management strategies.”The current situation, therefore, determines that we have to continue with fiscal prudence, but that we must at the same time engage in activities that grow the economy,” she said.A RURAL PRIORITY The Budget for 2006-07 “places emphasis on economic growth which is pro-poor”, she said.”High priority is given to the development of the rural areas, where most of the poor reside,” she told the Assembly.”Growth is promoted through improved resource allocations for the development of infrastructure such as roads and rails, schools, health facilities, water and electricity.This will improve the living standards of communities in these rural areas through the creation of jobs during construction and access to markets and services needed for economic advancement.We are also allocating more resources to welfare programmes that target the most vulnerable.”On this score, she announced that State pensions will be increased by N$70, from the current N$300 a month to N$370, in the 2006-07 fiscal year.”This Budget is a pro-poor, pro-growth Budget,” Kuugongelwa-Amadhila stated.In last year’s National Budget, the Finance Minister projected a Budget surplus of N$511,8 million for the coming year.Yesterday, Kuugongelwa-Amadhila revised that figure down to a surplus of N$114 million – although it is stated as N$122 million in the main Budget document setting out Government’s budgeted revenue and expenditure for 2006-07.Government plans to spend N$15,155 billion in 2006-07, which would be an 18,6 per cent increase on the total spending of N$12,772 billion budgeted for in 2005-06.At the same time, the Ministry of Finance is expecting an even stronger surge in State income during the 2006-07 financial year.Whereas Government income totalling N$12,354 billion was budgeted for in the 2005-06 fiscal year, this is forecast to swell by 23,6 per cent to a level of N$15,277 billion in the 2006-07 financial year.Kuugongelwa-Amadhila attributed this spike in income to “favourable developments on the revenue side, as a result of improved collections and higher earnings from the (Southern African Customs Union) pool”.DROP IN INCOME Namibia is expected to earn some N$6,1 billion from Sacu in 2006-07, which is a massive increase of 65 per cent on the income of N$3,7 billion from that source in the 2005-06 financial year.By the 2007-08 financial year, Sacu income is budgeted to be lower again at some N$4,5 billion.This will contribute to an expected fall of 8,5 per cent in Government income between the 06-07 and 07-08 fiscal years, the Budget document shows.From the 2006-07 year’s projected level of N$15,277 billion, Government income will decrease to N$13,98 billion in the next year.At the same time, spending is projected to be cut again after this year’s 18,6 per cent ballooning, to a level of N$14,7 billion in 2007-08.That will leave Namibia with a deficit of N$747 million, amounting to 1,6 per cent of Gross Domestic Product, in 2007-08.In the year after that, a deficit of N$1,13 billion, or 2,5 per cent of GDP, is projected.Those deficits would remain within Government’s target of keeping the country’s Budget shortfall below three per cent of GDP, Kuugongelwa-Amadhila said.At around 33 per cent of GDP, the country’s total debt level will however remain above the target limit of 30 per cent of GDP.Kuugongelwa-Amadhila once again – as in previous years’ Budget speeches by her and her predecessors in the Finance post – issued a warning about the dangers of continuing to run Budget deficits and increasing the country’s debt load.”While Government may consider borrowing additional funds to invest in projects that will yield returns in the future, one should remain cautious about falling in a debt trap and bear in mind the burden that debt puts on future generations,” she said.”Our daughters, sons and grandchildren will feel the effects of the ever-increasing debt burden that we are placing on them.Responsibility must, therefore, guide our design of fiscal policy.”