No new taxes

OGONE TLHAGE



Treasury has moved to tame its expenditure on key government projects in the wake of tough economic times with proposals presented by finance minister Calle Schlettwein showing just a minimal increase in public spending by 1.7% compared to the revised budget of 2016/17.

Schlettwein yesterday tabled a N$62.5 billion budget for 2017/18, which he said had to do with more than just tightening the fiscal purse.

Following an unprecedented financial challenge, Schlettwein has been facing a tough balancing act, with expectations to propel economic growth, while at the same time improving revenue collection.

Schlettwein followed a consolidation path when he tabled his mid-year budget review last year, resulting in spending cuts of approximately N$4.5 billion.

For 2017/18, revenue would be slightly less than N$53.43 billion, better than the estimated 3.5% estimated in last year’s budget review and an almost 10% year-on-year increase from an estimated N$51.51 billion in 2016/17. The situation was attributed to improved Southern African Customs Union receipts as well as an improved domestic revenue streams.

Additionally, Schlettwein expected that the budget deficit would show improvements over the course of the Medium Term Expenditure Framework (MTEF), which is expected to reduce to 3.6% of GDP in 2016/17. The budget deficit is further projected to fall below 3% in 2018/19 and average around 2.5% during the MTEF.

“As a result of the targeted fiscal consolidation programme we took in the 2016/17 budget and the mid-year review of that budget, we have realised better fiscal results and we are now able to forecast a more positive medium term economic outlook,” said Schlettwein.

“These are indications of having averted the deepening of the crisis which could have severe consequences. These gains came about because of principled, albeit painful actions. These early gains must be sustained, as a nation, we should resolve to nurture these emerging gains and keep spending pressures under control.”

Government has been experiencing cash-flow problems in the last financial year, with a substantial amount still owed to contractors for work done.

To this, government has allocated almost N$2 billion from the new budget to meet obligations for services rendered in the last financial year.

As widely expected, education received the largest chunk of the budget at almost N$12 billion.

An increase to the old-age pension was also announced, which will see senior citizens receive N$1 200 per month.

Defence, unsurprisingly, remained high on the allocation list.

“N$11.98 billion is allocated to the Ministry of Basic Education and Culture. This is the highest budget allocation in keeping with the historical priority accorded to education,” said Schlettwein.

An amount of N$3 billion was allocated to the Ministry of Higher Education, with the biggest allocation of N$926 million going to the University of Namibia, while the Namibia University of Science and Technology will get N$533 million.

Safety nets

“The Ministry of Health and Social Services receives the second highest allocation of N$6.51 billion while N$3.28 billion is allocated to the Ministry of Poverty Eradication and Social Welfare for the provision of social safety nets and other anti-poverty intervention measures,” he said.

The ministry of safety’s allocation was kept steady at N$5 billion while the defence ministry was allocated N$5.68 billion.

The Anti-Corruption Commission would get an additional N$50 million to strengthen the fight against corruption.

No new taxes

No tax increases were announced, nor were any new taxes introduced by Schlettwein.

“Regarding tax policy, I do not propose to general tax rate increases or [the] introduction of new taxes at this stage. I however wish to propose new tax policy and tax administration reforms as well as the completion of some of the major ongoing tax reforms with the objective of deepening and broadening the tax base, curbing tax evasion, profit shifting as well as improving overall efficiency in the tax administration function.”

Reforms would also be driven to deal with the government’s wage bill, which currently accounts for 50% of Gross Domestic Product.

“The civil service wage bill is a matter that has been discussed on many occasions and, yes, it is unsustainably high. Government through the Office of the Prime Minister has proposed new measures to prevent the further growth of the wage bill and related personnel expenditure, but also to reduce current levels. This would include freezing the size of the civil service and remodelling the government medical aid pension scheme.”

Schlettwein also mentioned changes to the current domestic asset requirements which will enable the repatriation of more domestic savings back into the country.

“Regulation 28, 15 and 29 will be amended to gradually lift the domestic asset requirement threshold from the current 35% of total assets to 45%. This will ensure that some of the domestic savings which flow out of the country will be invested locally to grow the economy.”

Schlettwein spoke candidly about the Namibian economy, which he says needed to be transformed.

“We need to transform the economy so that wealth is distributed downward without destroying our hard-won economic and political stability. As we struggle for a prosperous Namibia we have to contend with some challenging trade-offs,” he said.

He said the government had undertaken to continue with a pro-poor and inclusive economic policy.

“We have demonstrated our commitment to improvement of social welfare through poverty-reduction programmes while maintaining the priorities on education and skills development.”