Africa-Press – Namibia. NAMIBIANS need to brace themselves for tight financial times ahead, as analysts forecast that the government will continue to tighten its belt through fiscal consolidation in the forthcoming national budget to be tabled tomorrow.
Economists say the government only has the options of either adopting a debt-reduction package driven primarily by tax increases or adopting a package mostly consisting of spending restraint.
The national budget for the current fiscal year stands at N$69,7 billion. Economist Omu Kakujaha-Matundu said the minister of finance, Ipumbu Shiimi, has no choice but to consolidate financial gains achieved in the past medium term expenditure frameworks.
“Unfortunately, with constrained fiscal space the minister would be forced to retain spending at the same level as the previous year’s budget. But, still borrowing a little bit more, and jag expenditure a bit, if and only if it is to increase capital spending is not a bad idea,” he notes.
Another economist, Mally Likukela said Namibia is not out of the woods yet, and therefore he expects the minister to table a budget that speaks to the reconfiguration and reorientation of the economy.
He added that the few things that should feature prominently are the Covid-19 pandemic response budget, allocation for energy related expenditures such as the green hydrogen project, and the expenditure on infrastructure as Namibia gears up to become a logistics hub.
“I don’t really expect any dramatic changes in the structure of the budget. We are still in the fifth National Development Plan (NDP5), and planning and budgeting will reflect the aspirations articulated in NDP5 and the Harambee Prosperity Plan,” Likukela states.
Meanwhile, Simonis Storm economist Theo Klein added that they expect to see a continual fiscal consolidation, with reduced Covid-19- related spending.
He added that the budget will have innovative debt levels, flat revenue collection, and an increase in sin taxes with lower Southern African Customs Union (Sacu) revenue forecasted for this year.
“Lastly, we expect the development budget to remain constrained,” Klein said.
The 2021 midterm budget review delivered in parliament in November last year, presented some upward adjustments to revenue estimates, budget reallocations and plans to reverse the tide of low growth with micro-level interventions to diversify the economy.
However, the total expenditure ceiling is budgeted to decrease in 2022/23, in line with fiscal consolidation efforts. PSG Namibia’s research analyst, Shelly Louw, said they expect the budget deficit to narrow to 7% of GDP in the 2022/23 fiscal year, from a larger deficit of 8,7% of the GDP in the preceding fiscal year.
This is expected as the economic recovery gains traction relative to a very low base. Louw further said they still foresee some moderate fiscal slippages in the medium term, given the pressure from sharply lower Sacu revenues, the slow pace of fiscal reforms and a tendency for wasteful expenditure as well as rising interest payments.
“Operational budget cuts and improved tax revenues in line with reduced Covid-19 measures and a recovery in world trade may assist in narrowing the budget deficit,” she noted.
She added that the current account deficit widened to N$441 million in quarter three of 2021, compared with a narrower deficit of N$219 million in quarter two, the same year.
Louw added that the increase in goods imports, partly driven by the rise in the global oil price, has exposed the continued weakness in goods exports and net services compared with pre-pandemic levels.
“We forecast the current account deficit will narrow somewhat to 6,5% of GDP in 2022 from an estimated deficit of 7,6% of GDP in 2021, thanks mainly to improved commodity exports and tourism earnings,” she said.
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