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Even less spending for govt

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Even less spending for govtEven less spending for govt International ratings agencies Moody''s and Fitch have both advised the Ministry of Finance to implement budget cuts as economic growth slows.

Moody''s recently changed its outlook of the Namibian economy to negative. The agency however still felt the economy healthy enough as so not to change the credit rating Baa3 it had assigned. Notwithstanding, finance minister Calle Schlettwein still found it necessary to explain why it was necessary to follow the advice given and cut down on wasteful expenditure.

He said: “Domestically, we are faced with liquidity constraints [cash flow problems] to finance the elevated financing needs as a result of these shocks on public finance.

“As a result of these unfavourable developments, it was necessary and timely that we respond to these shocks in a timely manner with appropriate magnitude.”

According to Schlettwein, this has resulted in reducing expenditure by 2.8% of gross domestic product or some N$4.5 billion.

“Operational budget activities for the remainder of the year have to be aligned to the new norm and development budget projects not started are deferred and those that have recently started are slowed down.

“These reforms [corrective measures] are necessary and we must follow through with our pro-growth consolidation fiscal stance, without which our hard-won macroeconomic stability and fiscal sustainability will be eroded. We are optimistic that the current difficulties are manageable and that they are transitional,” Schlettwein said.

“As a first benefit of these concerted measures, we have been able to retain our investment grade rating. It is my expectation that asset managers who are responsible for managing the country''s vast institutional savings would equally recognise this concerted policy implementation through investment in government securities going forward in line with the announced deficit reduction stance,” Schlettwein said. Schlettwein also explained that steps were taken to ensure the currency peg with South Africa could be maintained by undertaking asset swaps with the Government Institutions Pension Fund of Namibia [GIPF]. Through the asset swap, the GIPF bought government debt, thus providing the finance ministry with cash flow.

As a result, there is now enough money in the country to import foreign goods for up to a level of three months. “In regard to reserve adequacy, recent currency swap arrangements for rand assets have resulted in boosting the stock of international reserves to an estimated 3.3 months of import cover, a much better position relative to 2.8 months of coverage in 2015. We expect improvements going forward, as well as the current account balances as exports from recent real sector investments improve.”

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