A continuing dose of financial discipline aimed at lowering Namibia’s budget deficit and reducing growth in government debt is the medicine finance minister Calle Schlettwein has in mind for the country’s ailing finances.

Schlettwein singled out the deficit and increasing national debt as key issues to be addressed through government’s spending plans over the next year when he tabled the national budget for the 2017/2018 financial year in the National Assembly on Wednesday.

“The Namibian economy is emerging from a perfect storm,” Schlettwein said early in his budget speech, setting the scene for the words of caution about the state of Namibia’s public finances that were to follow.

Remarking that the 2017/2018 budget was being presented against the backdrop of a challenging fiscal and economic environment, Schlettwein noted that economic growth in 2016 slowed to 1,3%, but was expected to recover – although slowly – to an annual rate of 2,5% in 2017, and to average 3,5% over the next three years.

Following the budget cuts that marked the past financial year, the 2017/2018 budget would maintain the fiscal consolidation policy to reduce the deficit and slow down the growth of government debt, Schlettwein said.

“We are aware that the actions taken to rebalance public finances have caused short-term pains, but we are confident that the long-term benefits of sustainable fiscal policy outcomes far outweigh the short-term impacts,” he said.

While economic growth and government income have recovered over the past year of budget cuts, there was still no cause for complacency, Schlettwein cautioned.

A budget shortfall of N$6,1 billion is projected for 2017/2018. Such a deficit would amount to 3,6% of the country’s gross domestic product.

In the 2016/2017 financial year, government spending was projected to outstrip income by N$9,9 billion (6,3% of GDP).

The deficit is projected to be lowered to N$4,6 billion (2,5% of GDP) in 2018/2019 and N$1,9 billion (1% of GDP) in 2019/2020.

While the 2017/2018 budget should bring the deficit down, it should also stabilise the national debt at around 42% of GDP, and thus strengthen the country’s macroeconomic stability, Schlettwein said.

Government debt is projected to increase by 7,6% to N$71,6 billion in 2017/2018, and to N$75,2 billion by 2019/2020. The cost of servicing government debt is expected to be N$5 billion during the 2017/2018 financial year.

Public service

Government plans to spend about N$62,5 billion during 2017/2018 – an increase of 1,7% on the expenditure of N$61,5 billion that was provided for in the revised 2016/2017 budget. During 2017/2018, income of N$56,4 billion is expected to flow into state coffers.

The public sector wage bill has been a major cause of increased public spending, Schlettwein noted. The wage bill, to which close to half of government’s income would be devoted during 2017/2018, was unsustainably high, he warned.

In order to prevent further growth of the public sector wage bill, proposals were to freeze the size of the civil service, not to fill vacant positions identified as non-critical, to limit annual salary increases to no more than the inflation rate, to review public service medical aid coverage, and to reduce spending on travel costs, consultants and overtime, Schlettwein indicated.

Corruption

Schlettwein drew applause from fellow MPs when he turned to the topic of corruption.

The fight against corruption needed the country’s full attention, he said: “Whether it is the misuse of office, soliciting and receiving of bribes, inflating tender prices or whatever improper conduct of persons who further their personal gain to the detriment of the common good, [it] must be dealt with.”

It is well known that the poor suffer most from the impact of corruption, Schlettwein continued, saying that the private sector also has a role to play in the fight against corruption.

“No one should engage in this ’dance with the rattlesnake’, where the initial moves may be very pleasant, but in the end, when the snake has bitten, it becomes lethal. Let us jointly remove the snakes from the dance floor by reporting them instead of engaging them,” he said.