News and Information

Namibia on debt row
December 2, 2004

GOVERNMENT's massive debt continues to soar, forcing the State to increase its borrowing to make ends meet.

Lower than expected State revenue for 2003-04 has pushed the Budget deficit to an all-time high of 7,5 per cent - throwing it way off its target of three per cent of Gross Domestic Product.

The previous record deficit was 5,8 per cent in 1996-1997.

According to its Medium Term Expenditure Framework, Government projected a Budget deficit of 4,1 per cent at the end of the last fiscal year.

Namibia's debt stood at N$10,2 billion, or 30,9 per cent of Gross Domestic Product, at the end of March.

Government had set a target for the national debt not to exceed 25 per cent of GDP.

Instead of tabling an Additional Appropriation Bill to provide extra funding to ministries in need, Finance Minister Saara Kuugongelwa-Amadhila had to impart these cruel realities to MPs in the National Assembly yesterday.

She attributed the situation to the "disappointing" State revenue for the period - 10 per cent less than the forecast figure of N$10,8 billion.

This, she said, was because of the strengthening of the South African rand against the US dollar, which reduced export earnings.

"This slump in revenue was worse than anticipated and had severe implications for the Budget deficit," Kuugongelwa-Amadhila told MPs.

The situation does not look set to improve considerably by the end of this financial year.

Kuugongelwa-Amadhila said that so far during the current financial year, revenue collection was off target by around four per cent, or N$320 million, of projected figures.

Revising the GDP forecast has pushed the current budget deficit up by nearly three per cent.

"Again, such a shortfall may force Government to either increase borrowing or cut expenditure.

For now we have opted for a compromise between limited additional borrowing and capping expenditure," she told the House.

The Finance Minister said the decision not to table an additional budget proved Government's commitment to a sustainable fiscal policy.

"While debt levels and interest payments in our country are still manageable, fiscal discipline is the only way to avoid falling into the debt trap," she said.

"The current economic situation does not allow us to be generous. We need to take the required measures to prevent us sliding into the debt trap."

But despite the dismal situation, Kuugongelwa-Amadhila did open the purse of the Contingency Fund - leaving only N$1,9 million to tide the country over until the next financial year.

An amount of N$150 million was allocated to this account through the main Budget in March.

The largest chunk - N$ 60,5 million - went to cover the costs of the Presidential, National Assembly and Regional Council elections.

Of this amount, N$30 million went to the Electoral Commission of Namibia, N$20 million to the Police, N$8 million to the Defence Force and another N$2,5 million to the Namibian Broadcasting Corporation for broadcast coverage of the elections.

The Office of the President received the next largest amount from the emergency fund.

A whopping N$52,5 million was allocated to speed up the completion of the new State House - an amount the Minister said was not in addition to that already budgeted.

She said this was to "satisfy contractual obligations" and to ensure that the project could be completed sooner.

The Office of the President also received an amount of N$1,7 million to cover expenses related to President Sam Nujoma's exit from office.

A further N$2,5 million went to the same office to purchase agricultural land for the National Youth Scheme, while another N$4,5 million was to fund "unforeseen operational expenses".

The Ministry of Health and Social Services will receive N$5 million to cover costs related to malaria prevention in view of the early start to the rainy season, while the recently concluded hearings into the DBC and Amcom cost N$3 million.

The Ministry of Trade and Industry will receive N$2 million to fund industrialisation projects, while the Ministry of Prisons will receive N$2,6 million for prisoner rations - an amount which was underestimated in the main budget.

The State has also had to fork out N$350 000 for the Caprivi Treason Trial.

Earlier this year, the Treasury paid out N$10 million towards flood relief and N$3,1 million to political parties.

The State funeral of a former special advisor in the Ministry of Works, Maxton Mutongolume, was also funded from this account at a cost of N$180 000.

Both the Congress of Democrats and the DTA appeared "surprised" by the funeral costs.

DTA leader Katuutire Kaura said the party didn't understand why the money needed to come from State coffers, but Kuugongelwa-Amadhila said it was because Mutongolume was declared a national hero and accorded a State funeral.

She said deaths were always unforeseen, and the State did not budget for such occurrences.

The CoD said in a statement released after the special National Assembly session that it needed to be "advised on the Government's obligations to the funeral of a private citizen".

The party said the financial situation came as no surprise, as the Government's "spendthrift" ways had caught up with it.

"The honeymoon is over and Namibians have to brace themselves for difficult times ahead.

This is the uncomfortable reality this Government did not want to tell the nation until after your votes had been cast," the CoD said.

New State House (Works) - N$52,5 mil ,
Presidential and National Elections (ECN) - N$30 mil ,
Police operations for Elections (Home Affairs) - N$20 mil ,
Caprivi Floods (Prime Minister's Office) - N$10mil ,
Election monitoring (Defence) - N$8mil ,
Malaria Treatment (Health) - N$5 mil ,
Unforeseen expenses (President's Office) - N$4,5mil ,
Political Parties (National Assembly) - N$3,1 mil ,
DBC/Amcom Commission of Inquiry (Finance) - N$3 mil ,
Rations for Prisoners (Prisons) - N$2,6mil ,
Agricultural Land for National Youth Service (President) - N$2,5mil ,
Election Broadcasts (NBC) - N$2,5mil ,
Industrialisation Projects (Trade) - N$2 mil ,
Presidential Exit Package (President's Office) - N$1,7mil ,
Caprivi High Treason Trial (Justice) - N$350 000 ,
Funeral Maxton Mutongolume (Finance) - N$180 000 ,
Total remaining - N$1,9 million


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