Calle sees signs of growth on cloudy horizon

By Timo Shihepo 

After two years of austerity measures to reduce debt and curb excessive spending in the public sector, the Namibian government will use 2018 as a ground-breaking year to achieve sustained economic growth in the coming years.

Some economic analysts have, however, warned that 2018 might not be that much different to previous years.

Namibia’s economy has been on a downward spiral since 2016, resulting in downgrades to junk status by both Moody’s and Fitch Ratings agencies.

Much of the downgrade was attributed to the fact that fiscal consolidation was temporarily interrupted during the 2017 financial year, when government funded emergency projects.

Fiscal consolidation is a policy aimed at reducing government deficits and debt accumulation. The interruption in fiscal consolidation resulted in forecasting the general government deficit to a narrow 6 percent of GDP from 6.9 percent in the 2016 financial year, against a revised government target of 5.3 percent.

Government is now, however, committing to a pro-growth fiscal consolidation stance (as announced in the 2017/18 budget) to stabilise and eventually reduce public debt and strengthen institutional capacity in 2018.

It is also committing to policy frameworks and appraisal capacity to manage fiscal risks effectively and fast-tracking implementation of the announced structural reform measures to support higher, inclusive growth.

“Those were difficult years (2016 and 2017). There are, however, signs of growth in 2018 as the economy has been adjusting to the changes that we have put in place, which is encouraging.

“We need to continue to formulate plans that will accelerate economic growth both in the private and public sector,” Namibia’s finance minister, Calle Schlettwein told The Southern Times in a brief interview.

In addition, the government has also committed itself to maintain a balanced fiscal consolidation policy with the express objective of stabilising the growth in public debt over the medium to long term, while maintaining the growth-friendliness and social development objectives of fiscal policy.

“The hindrance is that we have too much debt. Most of the plans are now concentrated on reducing this debt while looking at stimulating the economy and accelerating growth,” said Schlettwein.

Furthermore, plans are to gradually reduce the expenditure-to-GDP ratio threshold from 40 percent of GDP to 30 percent over the Medium Term Expenditure Framework (MTEF) and reduce the budget deficit threshold from 5 percent of GDP to below 3 percent of GDP over the MTEF.

Schlettwein said they are optimistic that the outlook might change but he is unsure when the junk status will be removed because that depends also on rating agencies.

“Well, it is still too early and some people are on leave including me. However, we will sit down again to strategise and map the way forward.”

In his New Year message, Namibia’s President, Dr Hage Geingob, was upbeat about 2018 saying it brings with it the promise of new beginnings, fresh opportunities and growth.

“The hands of time move forward, never backward. Let us, therefore, prepare to move forward. The hands of time are ready to take us into the New Year, leaving behind the stress, anxiety, regrets, disappointment, conflicts and setbacks of 2017,” he said.

Meanwhile, Simonis Storm Securities analyst, Indileni Nanghonga, said their forecast for expenditure to GDP is 32 percent. Simonis Storm Securities expects the budget deficit to widen by a bigger percentage compared to what government predicts.

“We forecast the budget deficit as a percentage of GDP at -5.5 percent, -5.6 percent and -3.5 percent for 2017/18, 2018/19 and 2019/20 financial years, respectively,” said Nanghonga.

The Ministry of Finance forecasts the budget deficit at -3.6 percent, -2.5 percent and -1.0 percent, for 2017/18, 2018/19 and 2019/20 financial years, respectively.

According to Nanghonga their deficit forecast is premised on lower tax collections than forecasted due to a weaker than expected economy, lower SACU receipts forecast and an upward revision in the expenditure ceiling.

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