{"id":57402,"date":"2023-11-01T18:53:12","date_gmt":"2023-11-01T18:53:12","guid":{"rendered":"https:\/\/www.africa-press.net\/namibia\/all-news\/shiimi-debt-servicing-exceeds-health-protection-spending"},"modified":"2023-11-01T19:05:20","modified_gmt":"2023-11-01T19:05:20","slug":"shiimi-debt-servicing-exceeds-health-protection-spending","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/namibia\/all-news\/shiimi-debt-servicing-exceeds-health-protection-spending","title":{"rendered":"Shiimi: Debt servicing exceeds health, protection spending"},"content":{"rendered":"<p><span style=\"color: #ff6600\"><strong>Africa-Press &#8211; Namibia. <\/strong><\/span>A soaring public debt bill, underperforming State-owned entities and a need to urgently diversify the domestic economy were some of the main concerns that emerged at yesterday\u2019s tabling of the mid-year budget review.<\/p>\n<p>As such, Finance and Public Enterprises minister Iipumbu Shiimi kept additional expenditure broadly aligned to anticipated additional revenue collections and re-allocated N$167.3 million across votes within the development budget.<\/p>\n<p>In summary, Shiimi increased the operational budget by N$2.5 billion, while the development budget remains unchanged at N$6.5 billion and an additional N$2.3 billion has been allocated to debt servicing and honouring of contingent liabilities.<\/p>\n<p>Also, based on better-than-expected revenue collection from businesses and individuals, Shiimi adjusted national revenue collection estimates up by 22% or N$3.8 billion from N$74.7 billion that was anticipated previously in the main budget.<\/p>\n<p>\u201cThese were the items we deemed unforeseeable and unavoidable, and warranted additional allocation from the available resources,\u201d Shiimi explained.<\/p>\n<p>Over the Medium-Term Expenditure Framework (MTEF) period, revenue is forecast to grow by an average of 8.8% to reach about N$82 billion by the 2025\/26 financial year.<\/p>\n<p>\u201cFor the current financial year, 2023\/24, the preliminary indicators point in many respects to continued improvements in fiscal fundamentals, driven in part by, among others, positive economic growth prospects and strong revenue mobilisation,\u201d said Shiimi.<\/p>\n<p>The minister explained that positive adjustments in revenues thus far for the current financial year reflect strong mid-year tax collection rates.<\/p>\n<p>This includes income tax on individuals, corporate tax on both diamond mining companies as well as non-mining companies, value added tax and dividends from companies, such as Debmarine Namibia, the Namibia Post and Telecom Holdings, the Namibia Desert Diamonds and the Namibia Port Authority.<\/p>\n<p>Said Shiimi: \u201cSignificant upward revisions were also done on the categories of non-resident shareholder\u2019s tax and withholding tax on services, for which mid-term collections are more than 90% and 130%, respectively. These outcomes partially reflect early tax gains from the ongoing exploration activities in the natural resources sector\u201d.<\/p>\n<p>SACU uncertainty<\/p>\n<p>During February this year, Shiimi tabled a total budget of N$86.4 billion, consisting of N$66.1 billion in operational expenditure, N$6.5 billion in development expenditure, N$2 billion in projects to be funded outside of the State Revenue Fund and N$10 billion in interest payments.<\/p>\n<p>Now, to properly plan for the next financial year, Namibia awaits its exact share from the Southern African Customs Union (SACU) pool, which will only be known in a few weeks.<\/p>\n<p>However, Shiimi has already warned that he is concerned about a notable reduction in SACU revenue: \u201cThe volatility in SACU revenues further underscores the need for Namibia to aggressively diversify her economy with the view to reduce dependence on SACU receipts\u201d.<\/p>\n<p>Being cognizant of this potential downside development in revenue, Shiimi noted that Namibia\u2019s strategy has been developed to ensure fiscal sustainability by supporting ongoing allocations to existing programmes.<\/p>\n<p>But the minister admitted that as long as the revenue outlook for the next financial year remains uncertain, there is a constraint on undertaking new significant expenditure commitments as well as committing to new policy proposals.<\/p>\n<p>Public debt<\/p>\n<p>The minister further cautioned that the public debt servicing bill has increased beyond the levels anticipated in the main budget. This is as the debt portfolio rises, coupled with prevailing tight financial conditions.<\/p>\n<p>This means Namibia is paying N$1.7 billion more, up to a total N$11.8 billion, which is equivalent to 15% of projected revenues for the year, during the current financial year to service its national debt.<\/p>\n<p>\u201cThe sharp increase in interest costs reflect unanticipated sharp movement in money market rates, relative to the increase in the benchmark rates. Debt servicing costs continue to absorb an increasing portion of the resource envelope, now exceeding expenditure on key social services, such as health and social protection.<\/p>\n<p>\u201cAs a developmental state, it is important to always prioritise economic and social development objectives in the design of fiscal policy. The degree to which debt servicing is increasingly crowding out such key developmental objectives adds further impetus to the call to prioritise stabilising the pace of debt accumulation going forward,\u201d Shiimi warned.<\/p>\n<p>The overall budget deficit is projected to remain steady at 4.2% of the GDP during the current financial year, with a slight improvement to levels estimated in the main budget.<\/p>\n<p>In nominal terms, however, the budget deficit is revised upwards slightly by N$579 million.<\/p>\n<p>Shiimi noted that over the MTEF, the deficit is projected to average about 4.4% of GDP, subject to the revenue path materialising over the next two years.<\/p>\n<p>\u201cThe positive economic performance registered over the past two years and further projected over the medium-term augurs well for our fiscal indicators. In FY2023\/24, the public debt stock is expected to increase to N$153.8 billion, equivalent to 66% of GDP, a slight improvement from 67.9% in the previous financial year,\u201d said Shiimi.<\/p>\n<p>Public enterprises<\/p>\n<p>The minister continued his annoyance with public enterprises, stressing that continuously bailing them out takes away resources needed for critical social investments, such as education, healthcare, housing, agriculture and social protection.<\/p>\n<p>Emphasising that the situation at some public enterprises warrants urgent and bold actions to ensure the sustainability, Shiimi said: \u201cThe fiscal risks from the operations of public enterprises have increased significantly through both requests for budgetary allocations as well as settlement of government guaranteed loans\u201d.<\/p>\n<p>Tax relief<\/p>\n<p>Meanwhile, Shiimi confirmed that with a view to providing some tax relief to low-income earners, government was increasing the threshold for income tax on individuals from the current N$50 000 to N$100 000.<\/p>\n<p>Also, government will be reducing the non-mining company tax rate by two percentage points over the next two years to 31%, effective in April 2024 \u2013 and a further reduction to 30% in April 2025.<\/p>\n<p>Additionally, the finance ministry will make some adjustments on personal income tax tables and will introduce an Internship Tax Incentive Programme, aimed at incentivising employers to enrol more interns by providing an additional corporate tax deduction. The total financial implication of these measures for the government is estimated at N$126 million.<\/p>\n<p>First impressions<\/p>\n<p>Reacting to yesterday\u2019s mid-term review, Josef Sheehama, an independent economic and business researcher, took an issue with State-owned enterprises, saying they must develop and implement sustainable turnaround plans for a sustainable future.<\/p>\n<p>\u201cWe cannot continue bailing them out. Drought relief is welcome, and we need to implement a sound strategy. Furthermore, the extent to which government can achieve fiscal sustainability will be dependent on the implementation of expenditure curb and accelerated growth-enhancing reforms,\u201d said Sheehama.<\/p>\n<p>He added this is critical for supporting the ongoing fragile economic recovery and should counteract the negative impact of several headwinds, ranging from higher energy and food prices to a relatively less accommodative interest rate environment.<\/p>\n<p>\u201cGovernment is determined to implement reforms aimed at stimulating demand through investment in infrastructure; employment programmes and tax incentives that should boost consumption; easing the skills constraints, and modernising network industries, which should ultimately lead to increased productive capacity,\u201d the researcher applauded.<\/p>\n<p>Also, local economist Klaus Schade felt there is some good news in the mid-year budget review statement.<\/p>\n<p>\u201cThe budget deficit has fallen below 5% to 4.8% in 2022\/23 and an expected 4.4% in 2023\/24. Public debt has not surpassed the 70% mark but remains below 67.9% in 2022\/23, and an anticipated 66% in the current FY 2023\/24. However, the monetary policy decisions by the Bank of Namibia are having a negative impact on government finances as statutory expenditure climbs back to 15% of revenue in contrast to the 10% target,\u201d Schade stated.<\/p>\n<p>He added that despite higher revenue, no additional allocation to the development budget is envisaged because of the low execution rate so far.<\/p>\n<p>However, Schade feels higher revenue could have been used to build, for instance, more classrooms to support the Namibian construction sector, create employment and support GDP growth positively.<\/p>\n<p>\u201cWhile the minister reiterated the fiscal policy amendments envisaged for the next years \u2013 income tax threshold increase, etc. \u2013 he has not mentioned the PSEMAS study that was conducted some time ago. A reform of PSEMAS is urgently needed to reduce the government contribution of more than N$2 billion that could be put to better use; for instance, investment in social infrastructure,\u201d Schade stated.<\/p>\n<p>\u201cThe Internship Tax Incentive Programme is a good step forward, but it needs to be ensured that businesses do not replace full-time employees with interns (where possible) to reap tax incentives. Also, replacing food distribution under the Drought Relief programme with food vouchers is a step in the right direction to increase efficiency and decentralise the benefits,\u201d he concluded.<\/p>\n<p><strong>For More News And Analysis About <a href=\"https:\/\/www.africa-press.net\/namibia\">Namibia<\/a> Follow <a href=\"https:\/\/www.africa-press.net\/\">Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Africa-Press &#8211; Namibia. A soaring public debt bill, underperforming State-owned entities and a need to urgently diversify the domestic economy were some of the main concerns that emerged at yesterday\u2019s tabling of the mid-year budget review. As such, Finance and Public Enterprises minister Iipumbu Shiimi kept additional expenditure broadly aligned to anticipated additional revenue collections [&hellip;]<\/p>\n","protected":false},"author":84,"featured_media":57401,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,3],"tags":[234,236,233],"class_list":["post-57402","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-community","tag-africa-press","tag-africa-press-namibia","tag-namibia"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.1 (Yoast SEO v27.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Shiimi: Debt servicing exceeds health, protection spending - Namibia<\/title>\n<meta name=\"description\" content=\"A soaring public debt bill, underperforming State-owned entities and a need to urgently diversify the domestic economy w ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/namibia\/all-news\/shiimi-debt-servicing-exceeds-health-protection-spending\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Shiimi: Debt servicing exceeds health, protection spending\" \/>\n<meta property=\"og:description\" content=\"A soaring public debt bill, underperforming State-owned entities and a need to urgently diversify the domestic economy w ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/namibia\/all-news\/shiimi-debt-servicing-exceeds-health-protection-spending\" \/>\n<meta property=\"og:site_name\" content=\"Namibia\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2023-11-01T18:53:12+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-11-01T19:05:20+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/nambia\/sites\/29\/2023\/11\/sm_1698852799.414968.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"720\" \/>\n\t<meta property=\"og:image:height\" content=\"479\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"7 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/namibia\/all-news\/shiimi-debt-servicing-exceeds-health-protection-spending#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/namibia\/all-news\/shiimi-debt-servicing-exceeds-health-protection-spending\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/namibia\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"Shiimi: Debt servicing exceeds health, protection spending\",\"datePublished\":\"2023-11-01T18:53:12+00:00\",\"dateModified\":\"2023-11-01T19:05:20+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/namibia\/all-news\/shiimi-debt-servicing-exceeds-health-protection-spending\"},\"wordCount\":1411,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/namibia\/all-news\/shiimi-debt-servicing-exceeds-health-protection-spending#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/nambia\/sites\/29\/2023\/11\/sm_1698852799.414968.jpg\",\"keywords\":[\"africa press\",\"Africa Press-Namibia\",\"namibia\"],\"articleSection\":[\"all news\",\"community\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/namibia\/all-news\/shiimi-debt-servicing-exceeds-health-protection-spending#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/namibia\/all-news\/shiimi-debt-servicing-exceeds-health-protection-spending\",\"url\":\"https:\/\/www.africa-press.net\/namibia\/all-news\/shiimi-debt-servicing-exceeds-health-protection-spending\",\"name\":\"Shiimi: Debt servicing exceeds health, protection spending - 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