Analysts give first impressions
Finance minister Calle Schlettwein wants to reduce the budget deficit.
Analysts shared their first impressions of the national budget right after it was tabled in the National Assembly on Wednesday afternoon and welcomed finance minister Calle Schlettwein's budgetary stance.
Capricorn Asset Management analyst John Venter was fairly optimistic about the government's plans to reduce the budget deficit and debt.
“I am acutely optimistic about the fiscal future of Namibia. The main agenda of the Ministry of Finance was to achieve fiscal consolidation without stifling growth. The plan [was] to reduce the budget deficit, and subsequently debt level, by prioritising resource allocation and improving the quality of spending, all the while stimulating growth by realigning expenditure with development goals and engaging the private sector on infrastructure development.
“I can see this happening because of the positive growth expectation supported by the end of the drought and the International Monetary Fund's prediction of growth in the global economy,” said Venter.
Venter did not think trade gains would be realised, though, because of slowed economic growth in South Africa and Angola.
“My scepticism stems from the possibility that trade gains will not be realised because of slow growth in South Africa and Angola, two of our strongest trading partners, as well as the fact that there is an increasing call for protectionist trade policy in the global economy. This puts growth expectations at a risk.”
Schlettwein also announced that the new semi-autonomous revenue agency would become operational on 1 April 2017, with a view to strengthening revenue collection.
To this Venter said: “The efficiency of revenue collection as well as the ability to curb non-productive expenditure will determine how well debt can be driven towards sustainable levels relative to our Gross Domestic Product.”
IJG in its assessment said: “The growing debt burden remains a concern and here there are some anomalies in the budget figures. While the debt stock is forecast to grow further, the interest burden is expected to decrease significantly over the Medium Term Expenditure Framework. This would suggest that government expects to roll a large portion of its debt into much cheaper funding, an unlikely scenario.
“Managing the deficit is crucial to maintaining the investment-grade credit rating that Namibia enjoys at present. Losing this rating would lead to longer-term debt sustainability issues as it would greatly increase the cost of refinancing Namibia's current foreign debt.
“The FY2017/18 budget strives toward fiscal consolidation, which is what is needed to ensure that government plays a sustainable role in the Namibian economy. Should this consolidation be implemented as planned, it would greatly improve the outlook for Namibia,” IJG added.
“We believe that the continuation of fiscal discipline has strengthened Namibia's case to escape a possible downgrade by credit rating agencies in 2017, thereby further improving the investment climate in Namibia. However, clarity on a number of announcements still needs to be sought, specifically as it relates to tax reform implementation.
“Moreover, despite some positive rainfall received this month, we were surprised by the fact that there was no specific mention made about investment in sustainable water infrastructure, given the water crisis that plagued the Central Area of Namibia in the last two years,” said Simonis Storm in their assessment.
STAFF REPORTER
Capricorn Asset Management analyst John Venter was fairly optimistic about the government's plans to reduce the budget deficit and debt.
“I am acutely optimistic about the fiscal future of Namibia. The main agenda of the Ministry of Finance was to achieve fiscal consolidation without stifling growth. The plan [was] to reduce the budget deficit, and subsequently debt level, by prioritising resource allocation and improving the quality of spending, all the while stimulating growth by realigning expenditure with development goals and engaging the private sector on infrastructure development.
“I can see this happening because of the positive growth expectation supported by the end of the drought and the International Monetary Fund's prediction of growth in the global economy,” said Venter.
Venter did not think trade gains would be realised, though, because of slowed economic growth in South Africa and Angola.
“My scepticism stems from the possibility that trade gains will not be realised because of slow growth in South Africa and Angola, two of our strongest trading partners, as well as the fact that there is an increasing call for protectionist trade policy in the global economy. This puts growth expectations at a risk.”
Schlettwein also announced that the new semi-autonomous revenue agency would become operational on 1 April 2017, with a view to strengthening revenue collection.
To this Venter said: “The efficiency of revenue collection as well as the ability to curb non-productive expenditure will determine how well debt can be driven towards sustainable levels relative to our Gross Domestic Product.”
IJG in its assessment said: “The growing debt burden remains a concern and here there are some anomalies in the budget figures. While the debt stock is forecast to grow further, the interest burden is expected to decrease significantly over the Medium Term Expenditure Framework. This would suggest that government expects to roll a large portion of its debt into much cheaper funding, an unlikely scenario.
“Managing the deficit is crucial to maintaining the investment-grade credit rating that Namibia enjoys at present. Losing this rating would lead to longer-term debt sustainability issues as it would greatly increase the cost of refinancing Namibia's current foreign debt.
“The FY2017/18 budget strives toward fiscal consolidation, which is what is needed to ensure that government plays a sustainable role in the Namibian economy. Should this consolidation be implemented as planned, it would greatly improve the outlook for Namibia,” IJG added.
“We believe that the continuation of fiscal discipline has strengthened Namibia's case to escape a possible downgrade by credit rating agencies in 2017, thereby further improving the investment climate in Namibia. However, clarity on a number of announcements still needs to be sought, specifically as it relates to tax reform implementation.
“Moreover, despite some positive rainfall received this month, we were surprised by the fact that there was no specific mention made about investment in sustainable water infrastructure, given the water crisis that plagued the Central Area of Namibia in the last two years,” said Simonis Storm in their assessment.
STAFF REPORTER
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