Government manages economy irresponsibly - DTAThe DTA says Namibia’s latest economic outlook indicates the irresponsible and unsustainable manner in which the government has managed the fiscus and the economy.
According to DTA treasurer-general Nico Smit the downward revision of Namibia’s economic outlook from ‘Stable’ to ‘Negative’ by the ratings agency Fitch is a reflection of the country’s worsening fiscal position.
Smit said the party agrees with the assertion by the minister of finance, Calle Schlettwein, that this revision is in no means similar to an investment grade and sovereign credit rating downgrade.
However, he said the downgrading cannot be brushed aside as a “mere” revision of the country’s economic outlook, as it is indicative of the likely direction of future investment grade and sovereign credit rating rankings. According to him the government’s irresponsible and unsustainable management of the fiscus and the economy can be seen based on key indicators such as growth of the budget deficit as a percentage of Gross Domestic Product (GDP), an increase in government debt as a percentage of GDP, declining SACU revenue, and the effects of the proposed New Equitable Economic Empowerment Framework (NEEEF) on foreign investment.
Smit said poor prioritisation has dogged the manner in which the government has allocated resources and reflected a trend towards spending on projects and in ways which benefit only the elite.
According to him the DTA has in the past expressed concern about the role of the government in driving economic growth.
Government expenditure accounts for no less than 45% of GDP, says Smit. “Not only is government directly engaged in employment creation, it is also the largest employer. It is our belief that the role of government in creating economic growth should largely be limited to creating and maintaining an environment that is conducive to investment and employment creation.”
Referring to a recent article in a daily newspaper, Smit said Schlettwein was quoted as identifying the main cause of growth in government debt as the international financial crisis, which led to government borrowing more money to push economic growth. Schlettwein is also quoted as acknowledging that the government did not create enough employment.
According to Smit the DTA believes that not only did the government not create enough jobs, but the jobs it has created through its public infrastructure development projects provided low-wage, low-skill and temporary employment for Namibians.
He said in essence the government has created employment that will not have a long-term economic benefit.
“The absence of long-term sustainable employment creation and an insufficient effort to establish a thriving small and medium enterprise (SME) sector speaks to a failure to widen the tax base and thereby increase the revenue which government annually collects through income and company tax,” said Smit.
He added that the worsening of Namibia’s current account deficit and the fact that the domestic economy remains highly sensitive to global fluctuations in commodity prices are indications that the government has failed to transform the economy beyond an unhealthy overreliance on mining.
Although the DTA commended the logic underlining any policy response that aims to rein in expenditure in the face of huge budget deficits and growing government debt, it questioned persisting with a potentially harmful policy.
“In this regard one can only assume that Swapo is willing to risk the economic stability of Namibia to achieve gains for its elite and those connected to it.”
Smit said it is worrying and disheartening that Fitch noted that meeting the government’s budget deficit target within the current fiscal year would be very challenging, if not impossible.
The DTA said it remains hopeful that the government will expand its policy action in this regard beyond spending cuts towards a move that will see the emergence of an overall regulatory environment that is more attractive to foreign investors.
ELLANIE SMIT