Namibia might be forced to borrow more


Windhoek – An economist with Simonis Storm Securities, Daniel Kavishe says the Namibian government would have to borrow more, possibly exceeding 30% of GDP during the Medium Term Expenditure Framework (MTEF) period as the 2015/2016 budget will be an expansionary one.

He said the current government debt at 24% of GDP fiscal deficit is likely to remain in the low- to mid-single digits.

The Ministry of Finance introduced the MTEF methodology in 2003 to the budget to formulate a comprehensive statement of government expenditure allocation by programmes and activity as well as expected output for up to two years beyond the budget year.

“The theme for the current President is poverty eradication and we expect that over the medium term, government spending will be aligned to the implementation of this vision,” he said, adding that the new government ministries would need a budget allocation which would increase operational expenses.

Despite this, Kavishe says that he does not foresee a drastic increase in operational expenditure, but expects continued increase in spending on infrastructure in line with the National Development Plan (NDP), industrialisation drive and vision 2030.

“Spending (will) likely to be on roads, rail, housing, water and electricity,” he maintained, adding provisions for drought relief would also increase expenditure, while inflation could increase due to social grants and programmes.

The economist said that there would be an additional allocation to poverty eradication, but it is not clear how the government would go about it and that it was only through social grants or programmes, “which, in our view, is not a long term solution” where large increases are expected.

A new Ministry of Poverty Eradication was created with the new Namibian government which was sworn in on March 21, 2015.

“If the government wants to achieve this through industrialisation or other economic developments then more funds will be channelled in that direction. We are also not expecting much in the way of increases in tax rates or new taxes, but we do expect the Ministry of Finance to continue with widening the tax net to improve collections,” he reckoned. Kavishe is also of the opinion that additional expenditure would also be needed for the mass housing project, which was launched in 2013 by former President Hifikepunye Pohamba to address the dire housing shortage. 

Executive Director of the Institute for Public Policy Research (IPPR), Graham Hopwood, says that “it would seem that poverty eradication is the responsibility of a series of ministries with their roles planned and coordinated by the National Planning Commission – rather than a single ministry – although we await to see what the exact tasks of this ministry will be.”

He said that the name change of the Ministry of Trade and Industry (MTI) to the Ministry of Industrialisation, Trade and SME Development indicates that the said Ministry would prioritise implementation of industrialisation and growth at home policy.

“I’m unclear about the exact role of the Ministry of Public Enterprises – it was mentioned that it will involve restructuring SOEs. There are now so many SOEs that the Ministry will have a difficult job overseeing them all. It should be given the responsibility for just a few of the SOEs that are most strategic for the economy such as Air Namibia, TransNamib, Namibia Wildlife Resorts and NamPower – where it could have more impact,” reasoned Hopwood.

April 2015
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