Friday 14 May 2021
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Mini-budget must address growth: Economists

It becomes an increasingly more daunting task each year, but finance minister Calle Schlettwein knows that all eyes will be on him when he delivers the medium-term budget policy statement (MTBPS) next week. This is as the nation awaits to see what plans he has to salvage the ailing economy.
Although economists are of the view that there is very little room to juggle for fiscal policy to support growth in Namibia, they still feel Schlettwein must vaccinate the economy to support businesses and households who are barely hanging on.
Government’s single biggest challenge is the cash-strapped state owned enterprises.
The two which come to mind is Air Namibia and TransNamib, the country’s biggest recipient of state bailouts.
Several incidents of picketing over salaries at SOEs such as Namibia Qualifications Authority(NQA), National Housing Enterprise(NHE) and the national broadcaster NBC are signs of the troubled days ahead if the economy is not salvaged.
While the medium-term budget policy statement is not expected to make any material changes to the tax regime, it could provide an indication of changes to come in 2019.
Economists expect the minibudget to look at ways to relocate resources as well as providing advance announcement to the medium-term policy proposals and spending priorities for the upcoming budget and the Medium Term Expenditure Framework (MTEF).
Cirrus Investment Co-founder, Rowland Brown expects the Minister to focus on growth matters.
Brown notes that Namibia needs real structural change in government expenditure and we also need a positive investment environment for this growth in which to take place.
Brown highlights that he hopes there no major surprises with regards to the budget review.
In terms of revenue generation, Brown explained that Namibia has passed the point of demising tax proceeds from tax rates.
“Namibia actually needs slightly lower taxes on corporates, especially corporates that are earning in the companies for growth and wealth creation.
The decrease in personal income tax at the low end and increase at the high end is good but I don’t think Namibia’s problems have anything to do with revenue. The problem have to do with expenditure because government has one of the highest tax to GDP ratios” he said.
Local economist, Mally Likukela highlights that the Minister should admit that the economy is in a crisis; only will this then bring to an end all uncertainties and doubts amongst the citizenry regarding the state of the economy.
This, Likukela believes will motivate people to objectively plan their survival techniques or strategies and eventually rally behind the government in salvaging whatever is remaining from the once flourishing economy.
“The Minister should stop selling dreams while everybody can see the sad realities. He should strategically reprioritize government spending within the existing fiscal framework, towards those activities that will instantly stimulate economic activities in the economy.
Long-term capital projects will take a lot longer to start supporting the economy and the economy does not have that much time, unfortunately.
Making use of the current debt to jump-start the economy or waste it on long-term projects may run the risk of totally corrupting the economy” he said.
Thus, Likukela suggests that Schlettwein should direct money straight in the pockets of citizens and not via middlemen.
“By spending directly from local suppliers, he also needs to look at closing all the Capital leakages such as awarding tenders to foreign companies who deliberately use any loopholes to loot out all funds outside the country. Spending on projects that are labour intensive such as roads, construction among many others will pour money directly into the pockets of local citizens, who will then spend on locally consumables and not imported machines or materials which will lead to reserves pressures again and drain the hard earned resources” he noted.
He recommends the Minister take a deliberate decision to also pour directly money into the pockets of SMEs as these are closer to the engines of the economy, and their effects are felt directly and instantly in the economy.
“Schlettwein should create buffer or cushion citizen from the ever increasing prices of essential commodities.
The gains that will be made by any stimulus package will instantly be eroded away by the increasing cost of living as measured by inflation rate.
Another option can be to zero rate some of the essential products, so that consumers are given a relief, although it might cost the state revenue in the short-term, the stimulated demand can raise retail profits in the long-run, that can lead to better corporate tax revenue in the end” he explained.
With regards to the budget review, Likukela highlights that he expects the announcement of more public debt and widened budget deficit.
“I also expect the same usual statements about reprioritization of government spending that have never yielded any tangible savings evidence.
The usual silence on critical budget issues, the bloated civil service wage bill, costly international trips of high ranking officials, and budget risks such as misappropriation, corruption and lack of accountability will prevail ” he said.
Likukela expects an affirmation of sticking or staying put to the costly policies such as the Common Monetary Area (CMA) currency peg whose life span have long expired and now continues to bleed the economy and exposing it to the most recklessly run economy in the entire world.
When it comes to revenue generation, Likukela states that Namibia Revenue Agency needs to be effectively and efficiently run, tax evaders should be prosecuted and those who mismanage public resources should be held accountable.

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