“Growth friendly pro -poor fiscal consolidation" MALLY LIKUKELA MANAGER: ECONOMIC AND MARKET RESEARCH
OVERVIEW OF THE GLOBAL ECONOMY 1 Macroeconomic Rate hikes rises cost of borrowing Rate hikes slowdown economy Namibian highly indebted Monetary Inflation was depressed in 2015, Accelerated in January 2016. Inflation Inflation defeats social safety networks (Grants) objectives • Weak exchange rate Currency • Good news for exporters • Bad News for importers • Additional pressure on the reserves More than sufficient reserves/import cover Forex Weak commodity negatively affected reserves Peg sustained and favorable import cover
REVENUE 2 GOVERNMENT REVENUE HAVE SHOWN IMPRESSIVE INCREASE OVER THE PAST DECADE 2016/17 Other BUT LOST STEEM … Taxes Taxes on Fast expanding economy (VAT collections, personal 0% Internation income tax and corporate tax) al Trade Improvements in Tax Administration (Tax base 26% increase, reduction in tax evasions) Taxes on where Income does 30,000,000 and Profits the $ 46% 25,000,000 come 20,000,000 from Domestic Taxes on 15,000,000 Taxes on Goods 10,000,000 property and 5,000,000 1% Service - 27% GOVERNMENT REVENUE TO COME UNDER PRESSURE… • Economic slowdown (income tax to come down) • Commodity price weakening (Profits to come down) • Production slowdown (Turnover, royalties to fall) • SACU Over-payments (Trade slowdown)
EXPENDITURE SECTORAL ALLOCATION 3 GOVERNMENT EXPENDITURES HAVE EXPANDED…. GOVERNMENT EXPENDITURES HAVE EXPANDED…. (SIZABLE RECURRENT EXPENDITURE ENVELOP) (SIZABLE RECURRENT EXPENDITURE ENVELOP) Fiscal consolidation necessary Fiscal consolidation necessary Low execution rate affects development budget Low execution rate affects development budget Economic Infrastructure Sector Sector 70.0 N$8.4 Bn N$5.2 Bn 60.0 50.0 Billion 40.0 Social Sector 30.0 N$28.5 Bn 20.0 HOW W IT IT 10.0 WILL WILL BE - SPENT 2014/15 2015/16 2016/17 (Proj) 2014/15 2015/16 2016/17 (Proj) Administrative sector SKEWEDNESS OF GOVERNMENT EXPENDITURES ON THE N$6.0 Bn OPERATIONAL AND DEVELOPMENT BUDGET… • Major government spending since 2012/13 Public Safety • Strong nominal GDP hides the real size od deficit Sector • Deficit figures do not capture investment losses due to N$13.0 Bn devaluation of the currency
MINISTRIES 4 Education, Arts and Culture 13,360,826 Health and Social Services 7,529,970 Defence 6,886,455 Transport 5,440,511 Safety and Security 5,314,267 Other 5,122,590 Higher Education, Training and Innovation 3,994,066 Finance 3,555,232 Poverty Eradication and Social Welfare 3,070,214 Urban and Rural Development 2,496,949 Agriculture, Water and Forestry 2,277,992 Industrialisation, Trade and SME Development 1,014,716 Veterans Affairs 972,821 International Relations and Cooperation 921,028 Gender Equality and Child Welfare 846,639 Land Reform 726,331 President 678,812 Works 666,444 - 4,000,000 8,000,000 12,000,000 16,000,000 N$ Billion
BUDGET DEFICIT 5 SKEWEDNESS OF GOVERNMENT GOVERNMENT EXPENDITURES HAVE EXPENDITURES ON THE OPERATIONAL EXPANDED WHILE REVENUE HAVE AND DEVELOPMENT BUDGET… LAGGED BEHIND…. • Major government spending since 2012/13 Sizable recurrent expenditure envelop • Strong nominal GDP hides the real size od Fiscal consolidation necessary deficit Low execution rate affects • Deficit figures do not capture investment development budget losses due to devaluation of the currency 2013/14 2014/15 2015/16 2016/17 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 - -10,000,000 -20,000,000 Revenue Expenses Deficit
DEBT 6 Namibia’s debt to GDP ratio surpassed 35% of GDP for Fiscal position is poised to deteriorate and fiscal the first time in 2015…. consolidation is critically needed… Lower than expected revenue collection • MOF signaled the start of Fiscal consolidation already Depreciation of the rand vis-à-vis the US dollar and major • Reprioritize certain expenditure/projects • currency Privatizing certain SOEs could free up some liquidity Large amount of debt issued over the past years are made • Encouraging private investment would relieve up of euro bonds infrastructure pressure on the government Although the debt stock is relatively low, the cost of • PPP and NEEF optimization could be a good start servicing it has risen compared to other nations
National Development Themes-------(Alignment)------Vision 2030 7 Basic Enablers Public Infrastructures Poverty Reduction Inclusive growth Health Education and skills Institutional Environment Infrastruct Poverty reduction ure Sector 8% Economic Vision on Social Sector Sector Prosperity & wealth 2030 2030 14% 47% creation Administra tive Sector 10% Service delivery Public Safety Sector 21% Economic Priorities • Public Infrastructure • Manufacturing • Tourism • Logistics
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