- A total of N$318 million was paid by the Road Fund Administration to partially settle outstanding invoices in the road sector in December last year.
- N$200 million was paid to PSEMAS service providers through a special Parliamentary authorisation in March this year.
- N$400 million was front-loaded for PSEMAS services in April this year. Since then, a further payment of N$315.6 million was paid for these services, bringing the total spending on PSEMAS to N$715.6 million since April 2017.
- N$181 million was paid out for invoices in the road sector and a further N$250 million was also paid out through a further arrangement with RFA.
Treasury says the austerity measures that it adopted avoided an economic catastrophe, while at the same time assuring those it owes for services rendered and goods procured that all the outstanding obligations will be met by September this year.
The press briefing was aimed at discussing the June 2017 Fitch Credit Ratings Action, state of the economy and progress on government contractual obligations.
“Consolidation efforts would not be without pain, it puts pressure on growth and consumption, but as I said, the pain would have been much worse if we did not do what we did. It could have been fatal if you do not react,” said finance minister Calle Schlettwein.
Fitch in its ratings action last month reaffirmed Namibia’s credit rating at the historical investment grade of BBB-, with a negative outlook. This investment grade rating action is for both long-term foreign and domestic currency bonds.
“The key driving factors holding firm the ratings position arethe strong medium-term economic growth potential and a track record of political stability, which augurs well for private sector investment, the fiscal consolidation programme, which helped to restore sustainability and contain unproductive spending, reduce the budget deficit and stabilise growth in public debt,” said Schlettwein.
He also attributed it to the moderation of the current account deficit on account of improvements in exports.
“This is thanks to the increased pace of activity in the mining sector and reduction in imports as construction of major investment projects and large fiscal expansion have reached completion,” said the minister.
He said: “It is an affirmation that the fiscal policy stance, which is by no means painless in the short-term, is paying off in ensuring long-term fiscal sustainability. As such, the Government has committed itself to this policy stance in favour of long-term gains, while mitigating against severe short-term reversals.”
The minister said there is reasonable optimism on economic activity and outlook this year compared to last year.
“The preliminary estimates for the First Quarter of this year, suggest that economic activity remained subdued, with a contraction of about 2.7 percent estimated for the period. The construction and manufacturing industries in general have come under persistent pressure, in part due to the base effects of realigning the budget as well as the depressed prices of metal commodities such as uranium,” he said.
When adopting the fiscal consolidation programme, the minister said: “We remained conscious of the growth implications and we have taken due consideration that the pro-growth dimension is reinforced overtime. For this reason, the size of development budget, which is projected to increase from N$6.7 billion this year to about N$9.0 billion by 2019/20 is one such measure.”
He said the move is complemented by infrastructure investment programs of the Public Enterprises in such sectors as energy, ports, roads and water. Government has also embarked on the structural policy reforms to crowd-in the private sector investment through PPPs and public procurement, while the public finance institutions remain key catalysts for private sector development.
Schlettwein was optimistic that growth prospects will gain more traction as the year progresses, with increased activity in the mining, agriculture and tourism sectors anchoring the outlook.
In the same vein, he called on the private sector as “the engine of growth” to play an active role in driving investment activity in the economy.
We see the private sector assuming a more wait-and-see position which is not too supportive of economic growth objectives, he said.
The minister reiterated government’s commitment to honor all its contractual obligations despite the economic storm in the country.
“Amidst the challenging economic environment which spans much of the Sub-Saharan African continent, the Government retains the ability to honour its obligations and implement the budget. In fact, for the 2016/17 financial year, the revised budget of N$61.5 billion was fully implemented, with the implementation rate standing at about 100 percent based on the preliminary data, amidst tight cash flow conditions. Likewise, preliminary revenue collection for the year is estimated at N$51.3 billion, some 99.6 percent of the revised target of N$51.5 billion. This outcome suggests that our rebalancing activity is realistic and constitutes a firm basis for anchoring sound fiscal policy as espoused in the current MTEF,” he said.
He also stated that the cash flow remains tight and spread across the financial year horizon.
“The Government is conscious of the hardship which the tight cash flow poses in the form of delayed payments to service providers, program implementation and related economy-wide impacts. Hence our resolve to frontload and accelerate settlement of especially the outstanding invoices,” said the minister.
As a demonstration of this commitment, Schlettwein said government front-loaded payments of some of the outstanding invoices already last year.