Download “Growth friendly pro-poor fiscal consolidation" MALLY LIKUKELA MANAGER: ECONOMIC AND MARKET RESEARCH

“Growth friendly pro-poor fiscal
consolidation"
MALLY LIKUKELA
MANAGER: ECONOMIC AND MARKET RESEARCH
OVERVIEW OF THE GLOBAL ECONOMY
Macroeconomic
Monetary
Inflation
Currency
Forex
 Rate hikes rises cost of borrowing
 Rate hikes slowdown economy
 Namibian highly indebted
 Inflation was depressed in 2015, Accelerated in
January 2016.
 Inflation defeats social safety networks (Grants)
objectives
•
•
•
•
Weak exchange rate
Good news for exporters
Bad News for importers
Additional pressure on the reserves
More than sufficient reserves/import cover
Weak commodity negatively affected reserves
Peg sustained and favorable import cover
1
REVENUE
GOVERNMENT
REVENUE
HAVE
SHOWN
IMPRESSIVE INCREASE OVER THE PAST DECADE
BUT LOST STEEM…
 Fast expanding economy (VAT collections, personal
income tax and corporate tax)
 Improvements in Tax Administration (Tax base
increase, reduction in tax evasions)
2
2016/17
Taxes on
Internation
al Trade
26%
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
-
Domestic
Taxes on
Goods
and
Service
27%
where
does
the $
come
from
Other
Taxes
0%
Taxes on
Income
and Profits
46%
Taxes on
property
1%
GOVERNMENT REVENUE TO COME UNDER PRESSURE…
• Economic slowdown (income tax to come down)
• Commodity price weakening (Profits to come down)
• Production slowdown (Turnover, royalties to fall)
• SACU Over-payments (Trade slowdown)
EXPENDITURE
SECTORAL ALLOCATION
GOVERNMENT EXPENDITURES HAVE EXPANDED….
(SIZABLE RECURRENT EXPENDITURE ENVELOP)
 Fiscal consolidation necessary
 Low execution rate affects development budget
GOVERNMENT EXPENDITURES HAVE EXPANDED….
(SIZABLE RECURRENT EXPENDITURE ENVELOP)
 Fiscal consolidation necessary
 Low execution rate affects development budget
Economic
Sector
N$8.4 Bn
70.0
3
Infrastructure
Sector
N$5.2 Bn
60.0
Billion
50.0
40.0
Social Sector
N$28.5 Bn
30.0
20.0
HOW IT
WILL BE
SPENT
10.0
2014/15
2014/15
2015/16
2015/16
2016/17 (Proj)
2016/17 (Proj)
SKEWEDNESS OF GOVERNMENT EXPENDITURES ON THE
OPERATIONAL AND DEVELOPMENT BUDGET…
• Major government spending since 2012/13
• Strong nominal GDP hides the real size od deficit
• Deficit figures do not capture investment losses due to
devaluation of the currency
Administrative
sector
N$6.0 Bn
Public Safety
Sector
N$13.0 Bn
MINISTRIES
4
Education, Arts and Culture
Health and Social Services
Defence
Transport
Safety and Security
Other
Higher Education, Training and Innovation
Finance
Poverty Eradication and Social Welfare
Urban and Rural Development
Agriculture, Water and Forestry
Industrialisation, Trade and SME Development
Veterans Affairs
International Relations and Cooperation
Gender Equality and Child Welfare
Land Reform
President
Works
13,360,826
7,529,970
6,886,455
5,440,511
5,314,267
5,122,590
3,994,066
3,555,232
3,070,214
2,496,949
2,277,992
1,014,716
972,821
921,028
846,639
726,331
678,812
666,444
-
4,000,000
8,000,000 12,000,000 16,000,000
N$ Billion
BUDGET DEFICIT
5
SKEWEDNESS OF GOVERNMENT
EXPENDITURES ON THE OPERATIONAL
AND DEVELOPMENT BUDGET…
• Major government spending since 2012/13
• Strong nominal GDP hides the real size od
deficit
• Deficit figures do not capture investment
losses due to devaluation of the currency
GOVERNMENT EXPENDITURES HAVE
EXPANDED WHILE REVENUE HAVE
LAGGED BEHIND….
 Sizable recurrent expenditure envelop
 Fiscal consolidation necessary
 Low execution rate affects
development budget
2013/14
2014/15
2015/16
70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
-10,000,000
-20,000,000
Revenue
Expenses
Deficit
2016/17
DEBT
6
Namibia’s debt to GDP ratio surpassed 35% of GDP for
the first time in 2015….
Fiscal position is poised to deteriorate and fiscal
consolidation is critically needed…
 Lower than expected revenue collection
 Depreciation of the rand vis-à-vis the US dollar and major
currency
 Large amount of debt issued over the past years are made
up of euro bonds
 Although the debt stock is relatively low, the cost of
servicing it has risen compared to other nations
•
•
•
•
MOF signaled the start of Fiscal consolidation already
Reprioritize certain expenditure/projects
Privatizing certain SOEs could free up some liquidity
Encouraging private investment would relieve
infrastructure pressure on the government
• PPP and NEEF optimization could be a good start
National Development Themes-------(Alignment)------Vision 2030
Basic Enablers
 Public Infrastructures
 Poverty Reduction
 Health
 Education and skills
 Institutional Environment
Inclusive growth
Poverty reduction
Prosperity & wealth
creation
7
Vision
2030
Infrastruct
ure Sector
8%
Economic
Sector
14%
Administra
tive Sector
10%
Social
Sector
47%
Service delivery
Public
Safety
Sector
21%
Economic Priorities
• Public Infrastructure
• Manufacturing
• Tourism
• Logistics
Private and confidential
ANY QUESTIONS?