In his budget speech, finance minister Calle Schletwein said he was wrestling with a national debt challenge.
“Over an extended period of time our government has spent way more than it earns in revenue and, as a result, debt stands at 42% of GDP,” he said.
This level of indebtedness has a story which is important to understand.
Prior to 1990, the majority of the nation never had access to formal lines of credit and lacked education in its use. After achieving democracy, access to credit was opened across the board with both positive and negative consequences. But much of that money was borrowed on an unsustainable basis, although government is speaking a different language. The obvious physical consequences of high debt levels are widespread impoverishment and an inability to improve circumstances, this coupled with a public wage bill that gobbles about 49 percent of the national budget, which means there is little money for development purposes. Many positive things have been done by government, the regulators and the courts to rein in irresponsible and usurious lending practices but no amount of regulatory measures can enforce responsible behaviour on the part of individuals.
Hence, it came as no surprise that lawmakers listened closely when Schlettwein spoke against corruption and subsequently urged offices, ministries and other government agencies to spend money prudently.
Schletwein also highlighted the need to realign public spending on national priorities. “We continue to face structural challenges and constraints which limit our ability to significantly reduce unemployment and eradicate poverty. The job content in our growth equation remains low and the structure of the economy is based on primary production, with primary commodity exports accounting for over 50 percent of merchandise exports. The Namibian economy remains at the bottom of the global value chain,” he said.
Schlettwein said to deliver on a more inclusive and job-creation growth agenda, Namibia needs to take decisive steps for economic diversification and industrialization, based on competitive advantage and exploiting the global value chains.
“We should advance the implementation of the strategies in the national development plans to drive our economy from the bottom to upper levels of the global and regional value chains. Only then, shall our national aspiration to be among the most competitive economies in the region become a reality,” he said.
He said development finance institutions will remain key facilitators for economic development in promoting domestic investment and access to development finance, while reforms in the Public Enterprises Sector will further improve efficiencies by eliminating expensive demands on public finances, but also high consumer cost.
“Public enterprises must concentrate on meeting their core deliverable expectations. These reforms provide a framework on how best Namibia can leverage its state assets to optimize development outcomes,” said the minister.
Schlettwein reiterated that the Namibian economy has never been in such a precarious situation and growth was the lowest in recent years.
“We are aware that the actions taken to rebalance public finance have caused short-term pains, but we are confident that the long-term benefits of sustainable fiscal policy outcomes far outweigh the short-term impacts,” he said.