Namibia can expect bigger budget deficit

29 Mar 2015 14:40pm
WINDHOEK, 29 MAR (NAMPA) – Namibia can expect to run a budget deficit of about N.dollars 8.9billion for the 2015/16 financial years, larger than N.dollars 7.6billion or 5.4 per cent of the Gross Domestic Product (GDP) that was set for the 2014/15 financial years.
Asset Liability Management official at Bank Windhoek, Suta Kavari, told Nampa in an interview on Sunday that while Government has seen drastic increases in revenue collections in recent years, as a result of improved tax administration, this is largely offset by continued expansions in expenditure.
“The size of the upcoming National Budget will increase as new ministries and departments are added to respond to the needs of the entire society,” he said.
Minister of Finance, Calle Schllettwein, will on Tuesday table the first National Budget under the new government in the National Assembly. The new budget is expected to exceed the 2014/15 National Budget of N.dollars 60.1billion.
“I expect a big, bold and expensive budget. Without deviating much from previous years’, I suspect Tuesday’s budget will see the largest expansion in expenditure on account of increase in the size of Government,” said Kavari.
He said the upcoming budget is expected to be heavy on Personnel and Infrastructure Expenditure. He thinks Personnel Expenditure will see one of the biggest increases on account of an ever-growing state wage bill because of the creation of new ministries coupled with additional Members of Parliament and bigger Cabinet.
According to a review of the 2014/15 National Budget by the Institute for Public Policy Research (IPPR), Government’s Operational Expenditure was set at about N.dollars 50billion, primarily due to the salary increase for civil servants, particularly in Education and Defence.
Kavari further noted that he expects a sustained focus on achieving some of the developmental goals set out under the National Development Plan 4 (NDP4), particularly on poverty reduction and unemployment.
According to him, the positive will again be an increase in projected revenue growth and growth outlook. In their review, IPPR projected revenue to grow by 31 per cent during the course of the 2013/14 and 2014/15 financial years to about N.dollars 52.5billion.
“The greatest expectations are in the Development Budget. There’s an expectation that this government’s focus would be on implementing some of the goals outlined under NDP4, which might result in a significant increase in budget allocation for development,” he said. Development was allocated N.dollars 9.6billion in the 2014/15 National Budget, according to the IPPR review.
Kavari said, “The creation of a ministry tasked with poverty eradication and the elevation of the National Planning Commission (NPC) to a ministry, highlights government’s renewed focus on development.”
“Whether the focus would result in attainment of some of the goals, remains to be seen,” he said.
He indicated that he expects the largest share of the budget to go to Education followed by Defence and Health, which were allocated
N.dollars 13.06billion; N.dollars 6.6billion and N.dollars 6.06billion in the 2014/15 National Budget respectively.
“I do not foresee a rise in the marginal tax rate and sin taxes will definitely be on the up. While Namibia is not constrained by growth and debt levels, or the need to consolidate public finances, I am of the opinion that our budgetary expansion is fiscally unsustainable at its current levels,” he noted.
In their review, the IPPR said the budget needs to become the powerful development tool that it can, and most importantly for the man on the urban street and the one in the rural villages adding, Government needs to ask whether the priorities appearing in the budget are in line with the development plans of the country and the wishes of the masses.