Africa-Press – Namibia. IN an attempt to lessen the burdern of recent high fuel and food prices, close to 40 countries have reduced consumption taxes, and 30 have introduced price freezes.
Namibia, however, continues to consult. The International Monetary Fund (IMF) has advised countries to adopt agile fiscal policies and safeguard the citizens against high prices.
In a recent IMF report, titled ‘Governments Need Agile Fiscal Policies as Food and Fuel Prices Spike’, the fund said if attended to early, accomodating policies could avoid unrest, although doing so may be difficult.
“Governments face difficult choices in this highly uncertain environment. They should focus on the most urgent spending needs and raise revenue to pay for them,” the report says.
The fund said “agile fiscal strategies tailored to individual country circumstances” would include fiscal policy that is responsive to the humanitarian crisis and economic disruptions.
Where inflation is high, the fund says fiscal policy should continue its shift from support to normalisation. In other cases, such as of high debt and rigid budgets, “governments will need to prioritise spending and raise revenue to reduce vulnerabilities”, the fund says.
According to the report, Covid-19 and the Russia-Ukraine war have created new risks for public finances and governments are under pressure to deal with rising energy and food prices.
“To alleviate the burden on households, ensure food security, and pre-empt social unrest, most governments have announced measures to limit the rise in domestic prices. However, such actions could have large fiscal costs and exacerbate global demand and supply mismatches, putting further pressure on international prices and possibly leading to energy or food shortages.
“This would further hurt low-income countries that rely on imported energy and food,” the fund says.
There is also an upside: For countries like Namibia that are commodity-dominated in terms of exports, government responses to the surge in international commodity prices should prioritise protecting the most vulnerable. According to New Era, the government is still consulting with stakeholders on reining in high fuel prices while other countries have acted on this.
These consultations were initiated through the Ministry of Mines and Energy, and the Ministry of Finance, as well as other state institutions deriving revenue from levies and taxes imposed on the price of petroleum products, with the aim to soften the burden of ordinary Namibians.
Saima Neke, energy fund director in the energy ministry, told New Era consultations are ongoing. It is not clear when the government will pronounce itself.
The IMF says a better solution to attend to the current economic difficulties would be to provide targeted, temporary, and direct support to vulnerable households, while allowing domestic prices to adjust.
This strategy would contain fiscal pressures, as many countries face rising debt burdens, and preserve incentives for the private sector to increase the supply of energy and food, the fund says.
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