Analysts share budget expectations

Analysts share budget expectationsBalancing act required in national budget Economists expect the finance minister to broaden the country's tax base and improve tax collection, while making further budget cuts. It remains to be seen how much fat finance minister Calle Schlettwein can trim when he tables what is perhaps one of the most highly anticipated budgets ever today.

Schlettwein followed a consolidation path when he tabled his mid-year budget review, resulting in spending cuts of approximately N$4.5 billion.

Sharing his insights, Namibia Equity Broker analyst Ngoni Bopoto said he expected Schlettwein to broaden the tax base and improve revenue collection.

Schlettwein had announced that the Revenue Agency Bill would be tabled in parliament.

“We expect a very fine balancing act characterised by revenue constraints and the need to propel economic growth. Tax will certainly be a key focus area with continued emphasis on broadening the base, improved collection and the regular sin taxes while Southern African Customs Union (SACU) receipts are expected to reflect some recovery. The expenditure side will remain contractionary, which can be expected to have a dampening impact on the economy,” Bopoto said.

He added: “Fiscal consolidation remains a key theme for ratings agencies and we are keen to see how the minister will fund the fiscus while curbing growth in public debt to appease investor and ratings agency concerns. In this regards, we hope to see innovative revenue-generating proposals.”

Economic Association of Namibia director Klaus Schade suggested in an earlier interview with Namibian Sun that several ministries should be merged as a cost-cutting measure and to avoid the duplication of functions.

“We could think outside the box in order to address the current fiscal situation: streamline government structures and merge ministries. For instance, social grants and social welfare services are shared between four ministries. They could be consolidated within one ministry,” Schade said.

Capricorn Asset Management's economic analyst Claudia Boamah said a fine balancing act was needed to ensure economic growth while making the necessary budget cuts.

“There is no question that policymakers have more control over expenditure reduction than they do over revenue generation in the interest of reducing the budget deficit.

“However, budget cuts will have to be strategically executed, otherwise much-needed economic growth will be delayed and that will in turn impede revenue generation and further increase the deficit. In order to achieve this, the usual upward adjustments will be made with respect to sin taxes and fuel levies,” she said.

Other proposals she expects to receive attention this year are a 'solidarity' tax, the probable introduction of capital gains tax and presumptive tax.

Added Boamah: “Value-added tax might be another avenue for revenue generation; however, it has implications for low-income households that might be counterproductive to the national aim of poverty reduction. Between widening the tax base, increasing certain taxes and instituting better tax collection mechanisms, the 2017/18 revenue collected might put a dent in the deficit.”

SACU executive secretary Pauline Elago said during a recent visit to President Hage Geingob at State House that Namibia's share of the customs union's receipts would be “satisfactory” this year.

“It is safe to expect a modest increase in revenue; the South African budget has given cause for optimism regarding Namibia's SACU revenue allocation. The performance of uranium and diamond exports might have a counteractive effect on the international tax,” Boamah said.

“Expenditure will have to be strictly implemented and monitored. The operational budget should be given special attention and should not be allowed to exceed the threshold,” she added.

In its economic outlook for the year 2017, the Bank of Namibia expected positive growth.

“Real Gross Domestic Product growth is estimated at 1% in 2016 and projected to increase to 2.9% and 3.8% in 2017 and 2018, respectively. Over the medium term, growth will mainly be supported by anticipated recovery in both agriculture and diamond mining, as well as improved growth in uranium mining and the transport and communication sectors.”





OGONE TLHAGE