- State panics, cuts spending by N$5 billion
- Opposition walks out
While economic experts were telling Treasury to accept responsibility for the crippling economic development policy and take steps to stop the country from teetering closer to bankruptcy, Finance Minister Calle Schlettwein arrived at Parliament yesterday to share with the nation howTreasury would slice up the mid-term budget. Schlettwein’s mid-term budget speech was delivered in the absence of a large chunk of opposition members of parliament, who staged a walkout from the National Assembly minutes before Schlettwein took the floor, after they clashed with ruling party members over the manner in which Government is handling the controversial marine phosphate mining issue.
MPs of Rally Democracy and Progress, DTA of Namibia and Workers Revolutionary Party walked out after talks over marine phosphate mining degenerated into a war of words. Things came to a head when Prime Minister Saara Kuugongelwa-Amadhila blocked discussions on phosphate after fisheries minister Bernhard Esau delivered a ministerial statement in which he castigated the Ministry of Environment and Tourism for allowing marine phosphate mining activities to take place in the country despite all mitigating factors being considered.In protest, the opposition deserted the Parliament, accusing the Government of choosing to protect a few people at the expense of the masses.As soon as calm returned to the House, however, Schlettwein delivered his Mid-Term Budget Review, in which he unveiled expenditure cuts of N$5.5 billion.“The expenditure cuts are urgently needed due to the downward revision in budget revenue estimates of about N$6.23 billion and the limited scope for further increasing public debt through borrowing. This is a necessary collective course of action and each and every single budget vote has contributed to this objective,” said Schlettwein.
He stressed that enhancing macroeconomic stability and placing public finance on a sustainable trajectory are of paramount importance.All eyes were on Schlettwein, as he announced measures that Treasury would adopt to prudently manage public funds.He said the Mid-Term Budget Review was being presented against the backdrop of the historical expansionary fiscal stance and its consequences as well as the significant negative developments in the global and regional economy, a challenging macroeconomic environment and the resultant unprecedented shocks to the domestic economy.“The Namibian economy has never before been in such a precarious situation. This calls for a well-conceived, timely, resolute and consistent policy response,” said a concerned Schlettwein.
On the domestic front, Schlettwein said a convergence of contributing factors, ranging from low commodity prices, the prolonged drought as well as currency and exchange rate shocks have diminished short-term growth prospects.“These external shocks have led to large upward adjustments in fiscal balances and debt metrics for most Sub-Saharan African countries, including Namibia,” he said.The domestic economy is not spared from the negative impact emanating from the global and regional developments. Domestic economic growth is estimated to have slowed to about 2.5 percent in 2016, a significant deceleration from the 4.3 percent projected in the budget and a marked slowdown from the robust growth rate of 5.3 percent recorded in 2015.
The major constraint on 2016 growth, according to Schlettwein, is partly due to the low external demand and fall-out from lower growth and domestic developments in the large regional economies of Angola and South Africa, the impact of the severe drought on the agricultural sector, the completion of large investment projects, constrained water supply for industries such as construction and beverage industry and the depressed commodity prices impacting on the mining sector.“As a result, nominal GDP for FY2015/16 is revised downward by 9.4 percent or some N$15.45 billion, while for the current 2016/17 financial year; the downward revision in GDP amounted to 16.1 percent or some N$30.54 billion,” said the minister.For the current fiscal year, the revenue is expected to fall short of forecast levels by approximately 9.0 percent or some N$6.23 billion due to the sharp reduction in economic activity.