IN a review of the of the Medium Term Expenditure Framework (MTEF) budget, a local economist is of the opinion that things could have been worse, but that yesterday’s budget statement comes with a sense of relief.
Floris Bergh, economist at Capricorn Asset management Namibia, stated that one must take inspiration from wherever one can find it as revenue estimates for the current year were revised to N$55.2bn (-5.5%) from the initial estimate of N$51.4bn (-12.0%).
Bergh added that total nominal GDP for the fiscal year also appears to be somewhat better – showing a -2.7% contraction rather than -4.4%.
Nominal GDP growth of around 5.5% is foreseen for the next three years by the Minister of Finance (MoF).
Bergh stated that this seems eminently reasonable, even perhaps conservative, but for revenue to grow by 9.4% in the outer year of the period is asking for a lot.
Bergh further explained that with expenditure remaining at the estimated N$72.8bn level, it means the deficit is now likely to be of the order of 10% of GDP, rather than 12.5% previously expected.
The MoF intends to cut back expenditure next the fiscal year to N$68.5bn and then allow it to grow by only 2% per annum thereafter.
Bergh stated that this will be a big ask, given the relentless pressure of the wage- and interest bills.
The latter amounts to 14% of total revenue, going on 16%, whilst the former is 52% of revenue.
The deficit is foreseen to reduce steadily from 10.1% to 4.1% of GDP over the period.
“We think the MoF missed a trick therein that he did not aim for a confidence inspiring 3%, especially since the intention is now to roll the Eurobond coming due in November 2021. The total funding requirement will remain large relative to the domestic economy,” Bergh said.
He concluded that with the reduction in the deficit, Namibia might not need the IMF funding in the end.
“As things stand, domestic debt will amount to N$75.8bn and foreign debt to N$43.9bn for a total of N$119.8bn or 68.8% of GDP. The debt trajectory will not stabilise over the forecast horizon, rising to 77% over three years. More needs to be done to get it under control,” Bergh concluded.