Nam cuts budget by R6bn- Treasury moves to contain spending

By Timo Shihepo

WINDHOEK–THE Namibian government has started reorganising its spending habits in a move to mitigate the country’s liquidity crisis.

Treasury has ordered budget cuts to shore up the country’s cash reserves and avert a slide into economic recession.

The Southern Times has learned that Namibia’s treasury is looking at making a 10 percent saving from its current budget of about R66 billion. The savings will be revealed in the delayed mid-term budget review due this month.

Ministries and government agencies have already been informed that when presenting their budgets at the midterm review, they are required to show how they intend to make a 10 percent saving which is to be returned to treasury. This should amount to about R6 billion.

President Hage Geingob, this week, confirmed the Namibia’s economy was going through some choppy waters, saying his government is determined to cut spending.

“It’s true we’re going through difficult times and we’re flying against headwinds,” Geingob said.

This will be the second attempt, this year, by the Namibian government to cut budget allocations to ministries and agencies. Earlier in the year, the finance ministry had called on all agencies and ministries to voluntarily cut on nonessential allocations and return such savings to treasury. Treasury later then issued a directive that all agencies and ministries freeze all government vacancies which were budgeted for. Again, the request stated that such savings should be returned to treasury. Then came Finance Minister Calle Schlettwein’s announcement that all capital projects and state tenders which have not yet started but were budgeted for should be frozen.

The government has also considered bonding government buildings as a means to raise funds.

Schlettwein insists the situation is not as bleak as it is portrayed by the media, saying: “I wouldn’t go as far as to say that country is broke, yes of course we do have challenges at the moment but we also see a bright future ahead of us.”

The finance minister did not respond to detailed questions about the budget cuts from The Southern Times, but highlighted treasury reforms during his parliamentary speech last week. He told the National Assembly that the country has to be contending with considerably lower than anticipated revenue outturn, due to weaker economic output.

“It should be noted that the current MTEF (Medium Term Expenditure Framework) which I tabled in February 2016 provides a basis for pro-growth fiscal consolidation, with phased spending cuts already commenced, while other non-core spending has been lowered or postponed in many cases,” he said.

Also as a result of shortfalls in the GDP and revenue during the financial year 2015/16, the fiscal indicators have changed; with the budget deficit for that year now estimated at about 8.3 percent, up from the 5.3 percent deficit that was budgeted for, while the public debt ratio has also risen to about 40 percent of GDP. Schlettwein says this outturn has carried over to the current fiscal year and needs to be contained.

“We’re now working on a comprehensive set of measures to shore up the resilience of our economy and we’re frontloading measures to place public finances on a firmer sustainable path through a fiscal adjustment framework and its corresponding policy packages. I’m due to announce, and start implementing these measures during the Mid-Year Budget Review which I will table in the last week of October this year,” he said.

Cutting Deep

The Southern Times established that the 10 percent amounts to about R6 billion – a massive increase from the R804 million in unspent funds the treasury took back from the seven ministries last year.

Only the Office of the President is exempted from budget cuts.

The Ministry of Education, Arts and Culture, which is refusing to increase teachers’ salaries by 8 percent, will be the most affected as it is expected to return R1,2 billion from its R12,7 billion budget.

The Ministry of Defence is also expected to return R660 million from the R6,6 billion budget, while the Ministry of Safety and Security will reimburse the treasury with R513,4 million from the R5,1 billion they received.

The Ministry of Works and Transport will give back R482,2 million, the Ministry of Higher Education, Training and Innovation some R340,9 million, the Ministry of Finance R329 million, while the Ministry of Rural and Urban Development is expected to return R280 million.

The least amount to be returned to the treasury is R4,9 million by the Anti-Corruption Commission (ACC) followed by the Ministry of Public Enterprises with R12 million.

October 2016
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