The Budget: Figuring out the figures

A CLOSER look at some of the figures in Government’s spending plans for the next three years shows that far less money is to be allocated to economically productive infrastructure development than might be thought, First National Bank economist Martin Mwinga pointed out at a briefing on Namibia’s new National Budget on Friday.

In the National Assembly on Thursday, Finance Minister Saara Kuugongelwa-Amadhila tabled a Budget outlining plans for total Government spending of N$17,8 billion, total expected income of N$18,3 billion, and a budget surplus of N$559 million, for the 2007-08 financial year. Of the total amount Government plans to spend over the coming year from April 1, N$3,8 billion is labelled as “capital expenditure” in budget documentation prepared by the Ministry of Finance.This represents an increase of 39,6 per cent over the N$2,7 billion in capital expenditure budgeted for in the 2006-07 financial year.However, of this N$3,8 billion, N$1,2 billion is classified as “lending and equity participation”, Mwinga told a First National Bank briefing on the Budget.This includes money that Government is spending to keep struggling national airline Air Namibia in the air, and it could be questioned how productive this sort of spending actually was, Mwinga commented.The N$1,2 billion budgeted for “lending and equity participation” represents a major increase in this sort of spending compared to the previous financial year, and is a major deviation in previous spending plans, he said.In last year’s national Budget, this type of spending was projected to amount to N$652,4 million in 2006-07, N$433,9 in 2007-08, and N$372 million in 2008-09.The projected figure for N$2007-08 for this type of spending has now been hiked to N$1,2 billion this year, while the figures for the two fiscal years that are to follow were cut to N$105 million in each of those years.The major beneficiaries of Government spending in this vein in the coming year will be NamPower, which is to receive N$500 million to help the power generation and supply parastatal meet the country’s electricity needs, the Agricultural Bank of Namibia, which is to receive a capital injection of N$150 million in the coming year, and Air Namibia.In one section of the Budget documentation it is indicated that Government plans to transfer N$136,6 million to Air Namibia over the coming year.In another part of the documentation, it is stated that the plan is to make a “a one-off Government targeted subsidy of N$435 million” to the airline, and in addition to also allocate N$101,7 million to it in each of the coming three years to help Air Namibia honour the lease agreements of its Airbus aircraft.Also included in the capital expenditure budget is projected spending of N$108 million during the 2007-08 financial year on the continuing construction of a new State House complex.While Mwinga questioned the economic wisdom of some of the spending plans in the capital budget, he gave Kuugongelwa-Amadhila credit for having managed to turn around Government’s finances – from a position where State finances were in the doldrums of a record N$2,4 billion budget deficit in the 2003-04 financial year, to a projected second successive annual budget surplus in 2007-08.This is a great achievement for the Finance Minister, and it sends out a signal to the outside world that Namibia is serious about fiscal discipline, Mwinga said.As long as the economy continued to register vibrant growth, Namibia should be able to meet its set budget targets, such as restricting the national debt to below 25 per cent of the country’ gross domestic product.Kuugongelwa-Amadhila on Thursday said growth of 4,9 per cent is projected for 2007, while economic growth is expected to average four per cent a year over the next three years.At a dinner after the tabling of the budget on Thursday, which was jointly organised by Standard Bank and PriceWaterhouseCoopers (PWC), the Minister emphasised that the new budget held challenges for the private sector but also created opportunities.”The envisaged record level of N$2,1 billion capital expenditure on the side of Government presents tremendous opportunities for the local private sector,” she outlined.Since the goods and services sector had been dominated by foreign suppliers for too long, she said, Government would do more to brand local goods and services.”We will also address the lack of mechanisms to address anti-competitive practices, particularly from large international companies, which has tended to stifle the emergence of new Namibian businesses.This year the Namibian Competition Commission will start work in earnest.In urge those of you who are aware of anti-competitive practices, to start gathering the facts and to make use of the Commission,” the Finance Minister said.In her Budget speech on Thursday, she also voiced concern over high transaction costs in the financial sector.”For instance, it cannot be right that a person gets out less than deposited into a savings account,” she remarked.Of the total amount Government plans to spend over the coming year from April 1, N$3,8 billion is labelled as “capital expenditure” in budget documentation prepared by the Ministry of Finance.This represents an increase of 39,6 per cent over the N$2,7 billion in capital expenditure budgeted for in the 2006-07 financial year. However, of this N$3,8 billion, N$1,2 billion is classified as “lending and equity participation”, Mwinga told a First National Bank briefing on the Budget.This includes money that Government is spending to keep struggling national airline Air Namibia in the air, and it could be questioned how productive this sort of spending actually was, Mwinga commented.The N$1,2 billion budgeted for “lending and equity participation” represents a major increase in this sort of spending compared to the previous financial year, and is a major deviation in previous spending plans, he said.In last year’s national Budget, this type of spending was projected to amount to N$652,4 million in 2006-07, N$433,9 in 2007-08, and N$372 million in 2008-09.The projected figure for N$2007-08 for this type of spending has now been hiked to N$1,2 billion this year, while the figures for the two fiscal years that are to follow were cut to N$105 million in each of those years.The major beneficiaries of Government spending in this vein in the coming year will be NamPower, which is to receive N$500 million to help the power generation and supply parastatal meet the country’s electricity needs, the Agricultural Bank of Namibia, which is to receive a capital injection of N$150 million in the coming year, and Air Namibia.In one section of the Budget documentation it is indicated that Government plans to transfer N$136,6 million to Air Namibia over the coming year.In another part of the documentation, it is stated that the plan is to make a “a one-off Government targeted subsidy of N$435 million” to the airline, and in addition to also allocate N$101,7 million to it in each of the coming three years to help Air Namibia honour the lease agreements of its Airbus aircraft.Also included in the capital expenditure budget is projected spending of N$108 million during the 2007-08 financial year on the continuing construction of a new State House complex.While Mwinga questioned the economic wisdom of some of the spending plans in the capital budget, he gave Kuugongelwa-Amadhila credit for having managed to turn around Government’s finances – from a position where State finances were in the doldrums of a record N$2,4 billion budget deficit in the 2003-04 financial year, to a projected second successive annual budget surplus in 2007-08.This is a great achievement for the Finance Minister, and it sends out a signal to the outside world that Namibia is serious about fiscal discipline, Mwinga said.As long as the economy continued to register vibrant growth, Namibia should be able to meet its set budget targets, such as restricting the national debt to below 25 per cent of the country’ gross domestic product.Kuugongelwa-Amadhila on Thursday said growth of 4,9 per cent is projected for 2007, while economic growth is expected to average four per cent a year over the next three years.At a dinner after the tabling of the budget on Thursday, which was jointly organised by Standard Bank and PriceWaterhouseCoopers (PWC), the Minister emphasised that the new budget held challenges for the private sector but also created opportunities.”The envisaged record level of N$2,1 billion capital expenditure on the side of Government presents tremendous opportunities for the local private sector,” she outlined.Since the goods and services sector had been dominated by foreign suppliers for too long, she said, Government would do more to brand local goods and services.”We will also address the lack of mechanisms to address anti-competitive practices, particularly from large international companies, which has tended to stifle the emergence of new Namibian businesses.This year the Namibian Competition Commission will start work in earnest.In urge those of you who are aware of anti-competitive practices, to start gathering the facts and to make use of the Commission,” the Finance Minister said.In her Budget speech on Thursday, she also voiced concern over high transaction costs in the financial sector.”For instance, it cannot be right that a person gets out less than deposited into a savings account,” she remarked.