Growth friendly pro -poor fiscal consolidation" MALLY LIKUKELA - - PowerPoint PPT Presentation

“Growth friendly pro-poor fiscal consolidation"

MALLY LIKUKELA MANAGER: ECONOMIC AND MARKET RESEARCH

1

OVERVIEW OF THE GLOBAL ECONOMY

Monetary Inflation Currency Forex Macroeconomic

 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)
• bjectives
• 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

2

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)

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)

Taxes on Income and Profits 46% Taxes on property 1% Domestic Taxes on Goods and Service 27% Taxes on Internation al Trade 26% Other Taxes 0%

2016/17

• 5,000,000

10,000,000 15,000,000 20,000,000 25,000,000 30,000,000

where does the $ come from

3

EXPENDITURE SECTORAL ALLOCATION

GOVERNMENT EXPENDITURES HAVE EXPANDED…. (SIZABLE RECURRENT EXPENDITURE ENVELOP)

• Fiscal consolidation necessary
• Low execution rate affects development budget

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…. (SIZABLE RECURRENT EXPENDITURE ENVELOP)

• Fiscal consolidation necessary
• Low execution rate affects development budget

Social Sector N$28.5 Bn

Public Safety Sector N$13.0 Bn

Administrative sector N$6.0 Bn Economic Sector N$8.4 Bn

HOW W IT IT WILL WILL BE SPENT

Infrastructure Sector N$5.2 Bn

• 10.0

20.0 30.0 40.0 50.0 60.0 70.0 2014/15 2015/16 2016/17 (Proj) Billion 2014/15 2015/16 2016/17 (Proj)

4

MINISTRIES

666,444 678,812 726,331 846,639 921,028 972,821 1,014,716 2,277,992 2,496,949 3,070,214 3,555,232 3,994,066 5,122,590 5,314,267 5,440,511 6,886,455 7,529,970 13,360,826

• 4,000,000

8,000,000 12,000,000 16,000,000 Works President Land Reform Gender Equality and Child Welfare International Relations and Cooperation Veterans Affairs Industrialisation, Trade and SME Development Agriculture, Water and Forestry Urban and Rural Development Poverty Eradication and Social Welfare Finance Higher Education, Training and Innovation Other Safety and Security Transport Defence Health and Social Services Education, Arts and Culture

N$ Billion

5

BUDGET DEFICIT

GOVERNMENT EXPENDITURES HAVE EXPANDED WHILE REVENUE HAVE LAGGED BEHIND….

• Sizable recurrent expenditure envelop
• Fiscal consolidation necessary
• Low execution rate affects

development budget 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

• 20,000,000
• 10,000,000
• 10,000,000

20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000 2013/14 2014/15 2015/16 2016/17 Revenue Expenses Deficit

6

DEBT

Namibia’s debt to GDP ratio surpassed 35% of GDP for the first time in 2015….

• 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 Fiscal position is poised to deteriorate and fiscal consolidation is critically needed…

• 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

7

National Development Themes-------(Alignment)------Vision 2030

Inclusive growth Poverty reduction Prosperity & wealth creation Service delivery

Vision

• n

2030 2030

Economic Priorities

• Public Infrastructure
• Manufacturing
• Tourism
• Logistics

Basic Enablers

• Public Infrastructures
• Poverty Reduction
• Health
• Education and skills
• Institutional Environment

Social Sector 47% Public Safety Sector 21% Administra tive Sector 10% Economic Sector 14% Infrastruct ure Sector 8%

Private and confidential

ANY QUESTIONS?