Wage bill still thorn in IMF’s side

Wage bill still thorn in IMF’s sideCalls for ‘well-structured policy’ The payroll of the civil service has been highlighted as on one of the reasons for government’s dire fiscal situation. Jo-Maré Duddy – Government should place “special emphasis” on the establishment of a “well-structured policy for the public sector to better align wage dynamics with productivity growth”, the International Monetary Fund (IMF) has said.

Concluding its yearly weeklong Article IV consultations with Namibia on Friday, the IMF highlighted the payroll of the civil service, as well as transfers to public entities (SOEs) as main sources of the deterioration of government’s fiscal situation.

“In preparation of next year’s budget, the strategic policy decisions and specific measures to deliver the planned adjustment [of spending] should be clearly identified,” the IMF said in a statement.

In his mid-year budget revision tabled recently, finance minister Calle Schlettwein allocated nearly N$390 million more to total personal expenditure compared to the main budget delivered in March. The total estimated remuneration budget for the civil service for 2018/19 now stands at more than N$29.3 billion or 45.6% or overall expenditure. In March it was 45%.

Commenting on the latest figures, Cirrus Securities said government also overshot its public service wage bill budget in 2017/18 by N$414 million or 1.5%.

“It is uncertain if the 1.3% y/y increase in the wage bill for 2018/19 will be deliverable as this likely represents a decrease in real wages for many government employees. The same goes for the 1.6% y/y increase in 2019/20 and 3.0% increase in 2020/21,” Cirrus said.

Growth

The IMF said the country has entered a “recession phase and is expected to recover gradually”. In his mid-year budget revision, Calle Schlettwein said the economy is expected to grow by -0.2% this year.

Like Schlettwein, the IMF expects economic growth to return to positive territory next year. The Fund didn’t tie a number to its forecast, while Schlettwein ventured growth of 0.9%. Expected growth in 2019, according to the IMF, will be supported by strong mining production and a rebound in construction activities.

“Growth is expected to strengthen over time, and converge to a long-term rate of about 3%, below the average of recent years, held back by low productivity growth and stagnant competitiveness,” the IMF said.

Downside risks to this outlook include lower than expected revenue from the Southern Africa Customs Union (SACU), slower growth recovery, and fiscal slippages that could undermine policy credibility and debt sustainability, the Fund continued.

“Namibia’s key challenges are to continue implementing fiscal consolidation plans to contain public debt dynamics and preserve macroeconomic stability, and pursing reforms to raise productivity, long-term growth, and job creation,” the IMF said.

It described the recent commitment to deliver this year fiscal deficit target and further deficit reductions over the next years as “a welcome step”.