By Confidente Reporter
CONSTRUCTION of the controversial N$2.2 billion Parliament and the N$1 billion Office of the Prime-Minister building among other capital projects that had been commissioned by Government might be put on hold as part of measures by Government to reign in on non-essential spending due to the volatile economic conditions bedevilling the country, the Minister of Finance Calle Schlettwein has said.
Confidente can reveal that the Finance Ministry is contemplating slashing the operational budget as well during the mid-year budget review in November.
The sentiments by Schlettwein come in the wake of Namibia’s economic outlook being revised downwards by Fitch, an international ratings agency. The agency made its forecast based on the country’s budget deficit that stands at 8.3 percent of the gross domestic product in the 2015/16 national budget.
In a bid to reign in on the budget deficit Government through the Ministry of Finance had in previous months frozen the filling of any civil service vacancies this year to raise at least N$750 million needed in drought relief aid to urgently feed nearly 600 000 people.
Also as part of stringent fiscal consolidation measures, Government now requires ministries to formulate monthly budgets where they outline what they intend to use the requested money for before Treasury approves and subsequently releases the funds to the ministries.
Those measures came hot on the heels of another government decision in June to slash the national budget by 7.4 percent which translates to N$4.9 billion from the N$67 billion national budget barely three months after it was presented. The Ministry of Finance also cut the projected 2017/18 national budget by 3.1 percent.
Treasury blames among other things macro-economic factors like a weaker currency, low revenue from the Southern African Customs Union (SACU) and poor performance of economies of the behind the volatile economic conditions country’s major trading partners as the major driving force.
Schlettwein, Monday, confirmed the imminent halting of capital project and the operational budget.
“We are considering cutting back on all non-essential projects so we are left with only projects that stimulate the economy and are pro-poor will go ahead,” he said.
Schlettwein however was quick to reveal that at the moment Government hasn’t sat to discuss which capital projects might have to be put on hold.
Meanwhile, economist, Purvance Heuer from Simonis Storm said if Government decides to cut on capital projects it might have negative implications on the economy.
“In 2015 the Namibian Government represented 45.5 percent of total GDP compared to 25 percent in 2010. This is evidence that the government has indeed become a larger part of the economy and a reduction in spending by them will certainly have a negative impact on GDP directly and via the private sector. Obviously this is good for ensuring the fiscal position is improved and balanced, but after a number of years of excessive spending this will result in cooling the economy.
“I foresee a steepening of the yield curve going forward as investor demand a better return for Namibian bonds as well as a potential for a lower GDP outlook for this year although it’s worth noting that most capital projects have already been put on hold earlier in the year so it may not impact our forecast of 4.1 percent GDP growth for 2016,” he said.
University of Namibia, Economics lecturer, Dr Omu Kakujaha- Matundu applauded Government for contemplating halting capital projects as an antidote to restore stability in the economy.
“Desperate times call for bold calculated measures what the minister is trying to do is commendable. Government is not having money to spend on non-essentials. Should they do so, then they have to borrow at the detriment of the economy. Government fiscal position is not that good, and that is one of the factors that have led to Namibia’s economic outlook being moved by Fitch from stable to negative.
“In tough times like these, you don’t want to continue building that tarred road to my village or that new Government office block or that new Parliament for that matter. You put them on hold until your fiscal position improves. So, as long as Government cuts spending on those capital projects that won’t compromise economic growth it is a welcome move.”
Rally for Democracy and Progress (RDP) president, Jeremiah Nambinga accused Government of being a victim of its own making largely due to its officials who are allegedly stealing money from its coffers with impunity.
“Money is being stolen from Government. Where is the GIPF money? Money is being stolen from the Ministry of Finance people there are working in cahoots with tenderpreneurs to inflate prices so they can steal a lot from Government and nothing is happening to them. Unless Government becomes serious and solve all these problems the economy will suffer. The establishment of the ACC in Namibia was an act of corruption itself, it’s only there to handle small fish not big fish. Government needs to be serious and abolish the ACC where people are paid to sit in offices and arrest only those who drive GRN cars without permission while the country’s resources are being looted,” he said.
Nambinga also accused Government of failing to attract any meaningful investors especially in the manufacturing sector so as to stimulate economic growth.
“Government has failed to attract investment that brings capital into the country. Government has failed to do enough to attract investors in manufacturing industry. We currently depend on South Africa for nearly everything 26 years after independence. Our economy is not growing. We should start manufacturing ourselves.”
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