No strings attached to IMF loan – Shiimi

Shiimi said conditionality in IMF lending often arises when a country enters into a managed economic or financing programme with the institution. This is not the case with Namibia’s RFI loan.

11 June 2021 | Local News

JO-MARÉ DUDDY







WINDHOEK

The around N$3.9 billion government borrowed from the International Monetary Fund (IMF) under its Rapid Financing Instrument (RFI) to help soften the blow of the Covid-19 pandemic on the domestic economy didn’t come with “any conditionalities”, finance minister Iipumbu Shiimi said yesterday.

He issued a statement saying the IMF loan was not granted on condition that government has agreed to suspend salary increases for all civil servants for five years and implement an early retirement scheme without consulting labour unions.

Speculation started after most employees at the Namibian Broadcasting Corporation (NBC) started a nationwide strike on 22 April. Among others, they insisted on a back-dated salary increase of 8%. The strike ended on 26 May without government meeting the demand for higher salaries.

Shiimi yesterday pointed out that government in 2016/17 already implemented fiscal policies to contain expenditure to try and stabilise the growth in Namibia’s public debt. This included managing the wage bill through a “net vacancy freeze and no upward remuneration adjustment through the collective bargaining process”, he said.

Government’s fiscal reform measures “did not commence as a result of Covid-19 impact on the economy, nor are they a consequence of the RFI loan uptake,” Shiimi stressed.

“These reforms have been announced in the successive budget statements and budget policy frameworks. Their gradual and prioritised implementation has been underway over the last four years,” he added.

Conditionality

Shiimi said conditionality in IMF lending often arises when a country enters into a managed economic or financing programme with the institution. This is not the case with Namibia’s RFI loan.

“An RFI is not a financial programme or a normal loan operation. It is an emergency funding arrangement and that is why, at 1.1% interest rate, it is cheaper in the context of Namibia as an upper middle-income country,” Shiimi said.

“The RFI arrangement is provided on the basis of the country’s existing and prospective policies for addressing the shocks. Suffice to say that a country is creditworthy if it has credible systems and policies in place to manage fiscal risks and its financial affairs prudently,” he added.

According to the minister, the RFI loan is part of “the combined sources of financing” to enable government to fund its budget deficit of N$15.9 billion in 2021/22. It will help to finance the budgeted programmes and development projects, “particularly the elevated needs in the health sector but also developmental programmes to enable the country to cope with the adverse impacts of Covid-19 on lives and livelihoods”.

Expensive civil service

The IMF recently released its annual staff report on Namibia, following its annual consultations with government in February. As in several previous reports, the IMF referred to the high public wage bill.

Government’s total personnel expenses in 2021/22 is estimated at nearly N$28.5 billion – about five times more than the total development budget for the current fiscal year. Including the contribution to government’s medical aid scheme (PSEMAS), personnel expenditure accounts for 46% of total expenditure and around 60% of total revenue in 2021/22.

The latest IMF report contains a letter of intent from Shiimi and the governor of the Bank of Namibia (BoN), Johannes !Gawaxab, written in February to the managing director of the IMF, Kristalina Georgieva.

In it, Shiimi and !Gawaxab said government “will contain the wage bill through a wage freeze in 2021/22, allowing for natural attrition, except in priority social sectors, and implementing a targeted and phased early retirement scheme”.

‘No contract’

Shiimi yesterday said the letter of intent is not a contract. It is a description of the country’s policies and measures which are self-initiated and implemented to address particular circumstances.

“It does not constitute a binding contract with the fund,” he said.

In its staff report, the IMF, among other things, said “the [Namibian] authorities are committed to containing the wage bill by freezing nominal wage increases and that there will be no inflation adjustment in 2021/22. A targeted early retirement scheme will be implemented during 2022/23-2023/24.

“[IMF] Staff noted that front-loading the planned public sector early retirement scheme may serve as contingency measure, in case of lower-than-anticipated SACU [Southern African Customs Union] tax revenues.”

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