PDM tears into mid-year budget
The official opposition says the midyear budget will fail to serve its intended purposes.
Popular Democratic Movement parliamentarian Nico Smit has poked holes into the mid-term budget recently tabled by finance minister Calle Schlettwein.
A lack of financial controls on the side of accounting officers, misguided growth estimates, an upward revision in spending for the remainder of the financial year, a continually growing public sector wage bill and a reduction in the capital budget summed up how Smit said the budget would fail to serve its intended purposes. According to Smit, the government's expectation that a rebound in commodity prices would spur growth for 2018 and beyond was misguided. This was because the anticipated increase was futile in Smit's opinion and also because commodity prices were often not driven by the fundamentals of supply and demand, but by speculative traders.
Gross domestic product (GDP) estimates were revised upwards by 2.9% in this year's mid-term budget, solely on an anticipated recovery in the mining and agricultural sectors.
“As a sector, agriculture's contribution to GDP is too small to make a significant impact so it must be assumed that most of the optimism and hope of revival is based on the mining sector,” Schlettwein said.
Smit believed that the recovery in the mining sector was not a given, however. “Commodity cycles over the past 24 months have shown that they are vulnerable to speculative trading. While it is not unreasonable to expect a gradual recovery, bargaining on a 3% increase is futile,” Smit said.
According to him, even if commodity prices were to increase across the board by a margin of 3%, Namibia is a primary producer of only five mineral commodities and could not bank on a corresponding increase in foreign earnings.
The revenues that would then be generated from the fishing and agricultural sectors were also too small in his opinion. “Unfortunately earnings from fish and agricultural commodities are too small to counter the relatively large swings in commodity prices,” Schlettwein said.
This, he said, did not justify an estimated annual growth rate announced in the mid-term budget.
No fiscal consolidation measures were mentioned in the mid-term budget. This was a case of Schlettwein developing cold feet, Smit felt.
“What was the use then of announcing a N$5 billion expenditure cut last year, continuing the stance in this year's main budget, only to reverse all the gains by asking this House now permission to spend N$4.5 billion?” Smit asked.
A revision in spending priorities would now push government's debt consolidation framework out by several years, Smit said.
Schlettwein had informed the National Assembly in August that the government had honoured invoices due to its service providers, the bulk of which were for construction and medical services. However, Smit said it was disconcerting to learn from Schlettwein that about N$2.2 billion of the requested additional expenditure would be to pay outstanding invoices, despite an announcement by Schlettwein that the government had fulfilled its obligations to service providers. This was in Smit's opinion a failure in financial control.
This, Smit said, was an indication of irresponsible behaviour on the part of accounting officers in the ministry of finance.
Smit further took issue with ministry of finance decision to suspend spending from the capital budget. The capital budget, Smit explained, reflected capital invested in government operations to ensure growth.
“When this investment is impeded, the growth potential of the economy is limited. The problems we experienced in 2016 will just re-manifest in 2019 and beyond,” Smit said, adding: “These suspensions are a very clear way of coating a very bitter pill with a thin veneer of sugar, to hide the prolonged damage to the economy.” The spending revisions were in Smit's opinion cosmetic and of no consequence as the majority were from the capital budget.
“The N$500 million real suspensions all come from the capital budget and they will have an impact in a year or two,” Smit stressed.
Smit had observed “incomprehensible adjustments” to the budget reallocations announced by Schlettwein in his mid-term budget.
“In the vote for home affairs and immigrations, remuneration has increased by a hugely significant amount of N$35 million. Where are the new staff members in this ministry that merit such a hefty increase in the wage bill?” Smit asked.
The vote for health and social services also provided an amusing example of budgetary gymnastics, Smit said. “Remuneration has gone up by exactly N$1 million. Wage bills do not increase by rounded figures, and so this is indicative that a minister has requested an additional N$1 million without discretion. What difference does N$1 million make when the wage bill already runs at N$3 billion,” Smit wanted to know.
OGONE TLHAGE
A lack of financial controls on the side of accounting officers, misguided growth estimates, an upward revision in spending for the remainder of the financial year, a continually growing public sector wage bill and a reduction in the capital budget summed up how Smit said the budget would fail to serve its intended purposes. According to Smit, the government's expectation that a rebound in commodity prices would spur growth for 2018 and beyond was misguided. This was because the anticipated increase was futile in Smit's opinion and also because commodity prices were often not driven by the fundamentals of supply and demand, but by speculative traders.
Gross domestic product (GDP) estimates were revised upwards by 2.9% in this year's mid-term budget, solely on an anticipated recovery in the mining and agricultural sectors.
“As a sector, agriculture's contribution to GDP is too small to make a significant impact so it must be assumed that most of the optimism and hope of revival is based on the mining sector,” Schlettwein said.
Smit believed that the recovery in the mining sector was not a given, however. “Commodity cycles over the past 24 months have shown that they are vulnerable to speculative trading. While it is not unreasonable to expect a gradual recovery, bargaining on a 3% increase is futile,” Smit said.
According to him, even if commodity prices were to increase across the board by a margin of 3%, Namibia is a primary producer of only five mineral commodities and could not bank on a corresponding increase in foreign earnings.
The revenues that would then be generated from the fishing and agricultural sectors were also too small in his opinion. “Unfortunately earnings from fish and agricultural commodities are too small to counter the relatively large swings in commodity prices,” Schlettwein said.
This, he said, did not justify an estimated annual growth rate announced in the mid-term budget.
No fiscal consolidation measures were mentioned in the mid-term budget. This was a case of Schlettwein developing cold feet, Smit felt.
“What was the use then of announcing a N$5 billion expenditure cut last year, continuing the stance in this year's main budget, only to reverse all the gains by asking this House now permission to spend N$4.5 billion?” Smit asked.
A revision in spending priorities would now push government's debt consolidation framework out by several years, Smit said.
Schlettwein had informed the National Assembly in August that the government had honoured invoices due to its service providers, the bulk of which were for construction and medical services. However, Smit said it was disconcerting to learn from Schlettwein that about N$2.2 billion of the requested additional expenditure would be to pay outstanding invoices, despite an announcement by Schlettwein that the government had fulfilled its obligations to service providers. This was in Smit's opinion a failure in financial control.
This, Smit said, was an indication of irresponsible behaviour on the part of accounting officers in the ministry of finance.
Smit further took issue with ministry of finance decision to suspend spending from the capital budget. The capital budget, Smit explained, reflected capital invested in government operations to ensure growth.
“When this investment is impeded, the growth potential of the economy is limited. The problems we experienced in 2016 will just re-manifest in 2019 and beyond,” Smit said, adding: “These suspensions are a very clear way of coating a very bitter pill with a thin veneer of sugar, to hide the prolonged damage to the economy.” The spending revisions were in Smit's opinion cosmetic and of no consequence as the majority were from the capital budget.
“The N$500 million real suspensions all come from the capital budget and they will have an impact in a year or two,” Smit stressed.
Smit had observed “incomprehensible adjustments” to the budget reallocations announced by Schlettwein in his mid-term budget.
“In the vote for home affairs and immigrations, remuneration has increased by a hugely significant amount of N$35 million. Where are the new staff members in this ministry that merit such a hefty increase in the wage bill?” Smit asked.
The vote for health and social services also provided an amusing example of budgetary gymnastics, Smit said. “Remuneration has gone up by exactly N$1 million. Wage bills do not increase by rounded figures, and so this is indicative that a minister has requested an additional N$1 million without discretion. What difference does N$1 million make when the wage bill already runs at N$3 billion,” Smit wanted to know.
OGONE TLHAGE
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