Shafudah tables N$106bn maiden budget

Ericah Shafudah, less than a week into her job as finance minister, faced a formidable challenge in her first budget presentation yesterday, as weak revenue prospects cast a shadow over the 2025/2026 fiscal year (FY).With projected revenue of only N$84.4 billion – hampered by plummeting global diamond prices and deferred dividends from key public enterprises – Shafudah unveiled an ambitious N$106.3 billion budget to fund the government’s priorities.The shortfall was driven by declining returns from DebMarine, delayed payouts from Namibia Post and Telecommunications Holdings (NPTH), and a postponed N$450 million windfall from Mobile Telecommunications Company&#039;s (MTC&#039;s) outstanding 9% government shareholding, which has yet to be sold.“Dividends from public enterprises have been reduced significantly owing to poor outcomes from Namdeb Holdings in line with the significant decline in global diamond prices over the period,” Shafudah said. Additionally, a total of N$1.6 billion in anticipated dividends from the imminent dissolution of NPTH has been deferred to FY2025/26 as a buffer against expected weaker revenues in the coming financial year. Adding to the revenue shortfall is the N$450 million from the anticipated sale of MTC’s remaining shares, which the government was unable to sell during its initial public offering in 2021.Addressing pressing needsTaking these factors into account, the finance ministry revised revenue estimates for FY2024/25 downwards by N$1.2 billion, to a total of N$90.9 billion.Further complicating Shafudah’s inaugural budget was a revision of the budget deficit, initially targeted at 3.9%, now projected at 3.2%.“The relatively poorer revenue outlook for FY2025/26, as I have outlined, posed challenges in the resource allocation exercise, requiring us to adopt a more rigorous approach in determining key and most impactful priorities to accelerate service delivery, address pressing needs and improve infrastructure development,” the minister noted.Expenditure breakdownProviding an overview of total expenditure, Shafudah allocated N$79.8 billion for operational costs, N$12.8 billion for development expenditure – including N$3.2 billion in externally funded development projects – and N$13.7 billion for interest payments.“This includes N$3.2 billion in projects financed outside the state revenue fund,” she added.Settling the N$13 billion eurobondFrom a financing perspective, FY2025/26 is expected to be an eventful year, with the government facing the imminent redemption of the US$750 million eurobond on 29 October.“In this regard, we have successfully accumulated US$463 million in the sinking fund over the past financial years,” Shafudah noted.To ensure adequate resources for this obligation, the government aims to add an additional N$3 billion to the fund.“Going forward, we intend to inject another N$3 billion (US$162 million) into the sinking fund during FY2025/26 before the bond matures. This will leave a balance of N$2.3 billion (US$125 million), which will be refinanced through the domestic market,” she explained.Given the appetite for government debt instruments and prevailing interest rates, Shafudah deemed it prudent to source funding locally.“Considering the sufficient liquidity levels and demonstrated appetite for government securities, we believe it is most optimal to source funding from the domestic market,” the minister explained. Moreover, government will focus on settling an International Monetary Fund (IMF) financial instrument accessed in 2021 to combat the Covid-19 pandemic.“In addition to redeeming the eurobond, the government is also making substantial principal repayments to settle the IMF Rapid Financial Instrument (RFI) financing, amounting to N$2.3 billion in FY2025/26 and a final tranche of N$1.2 billion in FY2026/27,” Shafudah said. These measures, she assured, will stabilise government’s debt stock over the medium-term expenditure framework (MTEF) period.“We are confident that this funding approach will stabilise the debt stock over the medium term. Overall, total public debt is expected to decline from 66% of GDP in FY2024/25 to 62% in FY2025/26. Following the settlement of these two hard-currency obligations, over 80% of our debt stock will be denominated in domestic currency, insulating it from exchange rate risks.”Ministerial allocationsThe health and social services ministry will receive N$12.3 billion in FY2025/26, with a total allocation of N$37.5 billion over the MTEF.“Within that allocation, we have earmarked N$780 million for FY2025/26 and N$2.7 billion over the MTEF for the development of health infrastructure across the country,” Shafudah noted. These funds aim to reduce congestion at state hospitals and improve service quality. Consideration has also been given to increasing personnel in the health sector, as well as securing pharmaceuticals and clinical supplies.The rail sector is set to receive priority, aligning with government’s goal of upgrading the transport network.“The ministry of transport will receive a total of N$2.7 billion in FY2025/26. This allocation will fast-track railway network upgrades and support the completion of ongoing road construction projects, including rural feeder roads to schools and clinics,” Shafudah stated. This vote will benefit from external loans for the upgrading of the Kranzberg-Otjiwarongo railway section and various roadworks.The agriculture and land reform ministry was allocated N$2.6 billion to, among others, support food security initiatives and the green scheme programme, including phase II of the Neckartal Dam Irrigation Project.On the sporting front, N$1.3 billion has been allocated for the construction of stadiums, basic sports infrastructure and Namibia’s sporting leagues.“This includes N$200 million for the construction of category two stadiums across the country, N$200 million for basic sports infrastructure, and N$50 million for sports leagues. Additionally, funds have been set aside for various youth programmes aimed at skills development and capacity building,” Shafudah said.Progressive and riskyReacting to the budget, former presidential economic advisor John Steytler, who was, until recently, the CEO of the Development Bank of Namibia, identified some positives in the budget."The tax-free retirement commutation threshold being raised from N$50 000 to N$375 000 was, in my view, very progressive and should be applauded. It will ease the inflationary impact on seniors and also boost pensioners’ liquidity.""However, it may come with risks of long-term income gaps without financial guidance," the economist added.

Shafudah tables N$106bn maiden budget

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Namibian Sun 2025-03-31

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Shafudah tables N$106bn maiden budget

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Namibian Sun 2025-03-31

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