Budget faces downward revision

Government may have to go back to the drawing board and reshuffle its budgetary priorities, as the first marks of the coronavirus bite start to show.

31 March 2020 | Economics



Heavy knock expected on


· Company tax


· Sacu income

Namibia’s N$56.2 billion national budget projected for the 2020/2021 financial year is likely to be revised downwards after the treasury conceded yesterday that it expects a heavy revenue knock from VAT, company tax and pay-as-you-earn (PAYE) due to the current lockdown in the country.

The Southern African Customs Union (Sacu), which contributes a third to state revenues in Namibia, yesterday told Namibian Sun that with trade severely impacted by the current lockdown, Namibia’s share from the revenue pool would shrink.

The 2019/2020 financial year ends today but tabling of the budget, which was originally scheduled for today, has been postponed indefinitely as the virus continues to make inroads in Namibia, where 11 positive cases have so far been confirmed.

The lockdown means some businesses have temporarily closed, with some employees were told their salaries have been halted until operations resume.

The affected employees will therefore not be paying income tax to the treasury, which is already under severe pressure following years of successive negative growth.

Spokesperson of the ministry of finance Tonateni Shidhudhu yesterday refused to confirm if the budget would inevitably be revised downwards, saying new finance minister Iipumbu Shiimi would confirm everything when he tables the budget.

“What I can say so far is that the [coronavirus] is expected to have a significant impact on the 2020/2010 national budget,” Shidhudhu told Namibian Sun yesterday.

Shiimi, plucked from political obscurity and from his role as governor of the bank of Namibia last week to help steer the Namibian financial ship to tranquil waters, was slated to table his budget today but with parliament halted due to the coronavirus, the nation will have to wait a little longer to hear from the new sheriff at John Meinert Street.

“The ministry is ready to table the budget as soon as the National Assembly resumes business,” he said.

“The 2019/2020 financial year ends today but tabling of the budget, which was originally scheduled for today, has been postponed indefinitely as the virus continues to make inroads in Namibia, where 11 positive cases have so far been confirmed.

“The ministry will only be able to tell the exact effects after 21 days or so, depending on the developments that will take place during the state of emergency.”

Treasury is expected to take a knock on its receipts as projected tax revenues come under review as government plans its spending priorities for the year.

Total tax revenue was projected at N$58.4 billion, or 29.8% of total revenue for the 2019/20 fiscal year. Income from the Sacu revenue pool, which accounts for just slightly over one-third of Namibia’s total revenue collected, or N$21.4 billion, may also be affected by the slowdown in trade witnessed by the slowdown in business.

Covid-19 impacts

Economist Klaus Schade said the delay in tabling the budget would delay government’s intentions to bail out debt-stricken households and businesses hit by the lockdown restrictions imposed to guard of the further spread of the coronavirus.

“It prevents government from presenting any fiscal stimulus packages that can support households and businesses affected across the country, but in particular companies affected by the lockdown in the Khomas and Erongo regions and those affected by the drop in external demand such as the tourism and travel industry,” he said.

Schade urged government to implement the budget against that backdrop of the slowdown in business activity.

IJG head of research Eric Van Zyl expected income government would get from taxes to wane in the face of the coronavirus.

“We as IJG would expect tax revenues to come under what was budgeted. We do not see tax collection coming in line with expectations, how far below that is tricky to say.”

Van Zyl expected expenditure to follow trends set out in the Medium Expenditure Framework when asked whether the delay in its tabling would affect government’s ability to fund its operations.

The Sacu’s director for research Benjamin Katjipuka said while current projections by the customs union would already have been determined, Namibia’s share from the revenue pool would be impacted by current trade flows.

“The allocation for this year has already been forecasted and will be audited in December for adjustments.”

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