Uncertainty reigns over Namibia budget cuts

By Timo Shihepo

Windhoek – Namibia’s finance ministry has vowed to continue implement austerity measures to contain the crippling liquidity crisis by cutting the budget and doing away with non-essential projects.

However, the treasury is uncertain whether there will be a significant reduction in the awaited 2017/18 national budget.

Many economists have predicted more cuts this year after government reduced the national budget by 10 percent (R5, 5 billion) from last year’s budget.

“Well, it depends what your definition of budget cuts is. If we are taking money from non-essential projects to take it to vital projects, that will still happen, but if you are referring to cutting the national budget overall, we don’t see that happening in the current financial year and throughout this year,” Finance Minister Calle Schlettwein told The Southern Times.

After last year’s budget cuts it is feared that more cuts are expected to continue this year. This is because Namibia is still battling tough economic conditions which resulted in many capital projects being halted, vacancies frozen and the ceasing of financial study aid to government employees.

The economy is battling numerous negative factors such as low regional economic and trade performances especially for partners such as South Africa and Angola. Other factors include depressed commodity prices, a severe drought and significant shocks to public revenue.

The finance ministry is not denying the challenges the country is facing, but Schlettwein is optimistic about the future: “We have managed to lessen the pain, well the pain is still there but its pain that will not see us cutting the national budget. We are still a small open economy but we have managed to bring the pain to a sustainable level and we are quite confident that we will keep the public’s finances at a sustainable level. We are optimistic that things will improve very well this year,” said Schlettwein

Collection process

Government is still struggling with its collection process with the ministry of finance still owed R19 billion in unpaid taxes (accrued penalties and interest) since 1990.  The situation has puts the ministry in a dilemma because it is caught between forcefully collecting money owed to government and the fear that uncompromising collections measures might close businesses, which is also not a good thing for an ailing economy. Schlettwein added that it does not make sense to force businesses to close because it means a loss of income for both the business owners, taxes for government and it could result in a dent in the economy.

The ministry rather opted to introduce a tax incentive programme that writes off 80 percent of the interest on tax debt. This means, taxpayers will only be required to settle the outstanding tax amounts, and only pay 20 percent of the interest accrued on the principal tax debt. The programme stared last week and will go on for six months.

Taxpayers who fail to apply to the finance ministry to have a portion of the interest written off during the period will have to pay for everything including the full interest and penalties.

Positives

Despite last year’s turmoil,  government has managed to revise downward R4.5 billion to R61.49 billion of the total expenditure as a measure to align the budget to the revised economic and revenue outlook.

As it stands the revised budget for 2016/17 is fully funded and the expenditure execution to date of the 75 percent suggests that the ministry is on course to fully execute the budget for the upcoming financial year.

“Since November 2016, following mid-year budget review, government deliberately increased payments to suppliers, contractors and other service providers. To put this into perspective, the Total Amount Warrant (TAW) approved for November and December 2016, amounted to R8.2 billion, whilst the actual payments made by government totalled R10.1 billion,” said Schlettwein.

February 2017
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