Critical Review of the 2011/12 National Budget Presentation to National Assembly Thursday, 11 March 2011 Martin Mwinga Knowledge. Creativity. Solutions
Budget Context: Incidence of Poverty by region Namibia’s Unemployment stands at 51%, Poverty rising and inequality high.
Budget Context: Incidence of Poverty by main source of income Are there measures in the budget addressing poverty directly?
Targeted Intervention Program for Employment & Economic Growth (TIPEEG) Economic Growth & Job Creation • The new government economic growth strategy can be broken down in phases: • Short run (1-3 Years): In the Short-runGRN will spend more than N$100 billion to support economic growth and job creation and the following measures are suggested: • Expansionary Economic Policy Package (Fiscal Policy, etc) • Spending on Targeted Infrastructure (for future manufacturing in the medium term); • Subsidies to SOEs and targeted support to private Enterprises to boost production; • Regulatory interventions that effectively address market and state failures • Medium-Term (3 – 5 Years): • Agriculture based manufacturing (Agriculture Value Chain) • Government targeted support program to induce the Private Sector to invest in targeted sectors; • Other Manufacturing activities, where Namibia has comparative advantage; • Long – run (Year 5 & beyond): • As full employment is achieved, the state must increasingly reduce its involvement in the economy and outsource and transfer ownership to private sector; GRN confines its support interventions to knowledge- and capital-intensive sectors in order to remain competitive
The 2011/12 Budget Announced a New Economic Growth Path TIPEEG Prior Economic Sectors Agriculture To boost production in the Agriculture by providing infrastructure, targeted subsidies, agriculture loans, training and skills development. Tourism To support the establishment of more tourism facilities, improve the quality of tourism facilities, attract more tourist to Namibia through intensive marketing. Transport To build more roads, improve and expand the railway network Housing & Sanitation To build more houses (6000 unit) TIPEEG is silent on productive infrastructure such as water supply, irrigation schemes, manufacturing.
2011/12 National Budget Unpacking Government Budget Expenditure The 2011/12 Budget makes a provision for an expenditure increase of 30% (excluding interest payments) to N$35, 869 200from N$ 27, 574 700 in 2010, an increase of N$8, 294, 500. The Increase is spent as follows: Social Sector (education, health etc) Increase by N$3 583 044 to N$13 907 044. Administrative Sector Increase by N$1 803 864 to N$8 372 464. Economic Sectors Increases by N$1 248 999 to N$4 295 899. Infrastructure Developm Increase by N$1 211 568 to N$2 983 268. Public Safety Sector Increase by N$447 million N$6 310 525.
Unpacking Government Budget Expenditure: Priority Sector No 1: Agriculture Agriculture Allocations increase by N$749 million in 2011/12 : N$519 million for construction of silos and cold storage facilities, N$230 million for training, administration and other operating expenses. Impact on the economy minimal.
Unpacking Government Budget Expenditure: Allocations to Priority Sector No 2: Tourism Sector 2011/12 Tourism Allocations amounts to N$791 million , an increase of N$443 million. The increase is allocated as follows: N$266 million to Namibia Wild Life Resort (NWR), Namibia Tourism Board: N$70 million, & remaining balance of N$100 million for operations.
Unpacking Government Budget Expenditure Priority Sector No 3: Transport Transport Allocations increase by N$1.2 billion in 2011/12 : N$645 million on Roads construction and upgrading, N$270 million for railway maintenance and rehabilitation, N$137 million government services, and other operating expenses.
Unpacking Government Budget Expenditure Priority Sector No 4: Housing Allocations to Housing increased by N$287 million in 2011/12. A total of 6000 houses will be built. N$30 million allocated for rural development.
Revenue Analysis: Namibia Dependent on a Regressive Tax that hats the Poor most GRN estimated revenue for 2011/12 at: N$28 billion
Conclusion & Summary on 2011/12 TIPEEG No details on this Intervention, the targeted sector of Transport, Housing & Sanitation does not have a good multiplier effect. Allocation to Agriculture and Tourism not well targeted. Additional Budget Expenditure Additional expenditure of N$ 8 billion not expansionary as demonstrated above. The budget deficit at 9.8% and debt to GDP approaching 30% raises questions about sustainability of fiscal policy going forward, in light of revenue constraints & high expenditure that cannot be reduced. Deficit & Debt Position A breakdown of allocation to the priority sector shows that we spending money on projects with no or negative multiplier effect, and very little impact on the economy. The high deficit and rising debt not matched by sufficient economic growth – poses major risk that might become difficult to manage.
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