Shiimi, the money spender

Government’s first post-Geingob national budget is expansionary in nature and includes a 5% salary hike for civil servants and a once-off tax legacy write-off, signalling a departure from the fiscal tightrope the state has had to walk over a nine-year period. The budget also makes provision for a N$200 upward adjustment in the grant payable to pensioners, which currently stands at N$1 400 per month. Meanwhile, the Electoral Commission of Namibia (ECN) will receive an allocation of N$438 million to ensure smooth and timely voter registration as well as to undertake the presidential and national assembly elections towards the end of the year, finance minister Ipumbu Shiimi said.Tabling the fiscal blueprint for the 2024/2025 financial year, Shiimi laid down a N$100.1 billion budget, signalling government’s intent to bolster domestic economic activity. The expansionary budget stance also includes N$3.2 billion in development projects funded through external loans and grants as well as N$12.8 billion in interest payments.“The strengthening domestic economic fundamentals and the resultant strong revenue performance have created an avenue for us to expand the spending envelope to accelerate service delivery, address the most pressing needs and improve infrastructure development,” Shiimi said of the rationale behind embarking on an expansionary path. This marks a 12.4% increase in spending, comparative to the 2023/2024 fiscal year (FY). Accordingly, the operational budget is estimated at N$74.6 billion, representing an increase of 8.8% over the FY2023/24 estimates. “The increase in operational expenditure largely reflects the 5% adjustment in the civil service wage bill at a cost of N$1.7 billion to guard against the erosion of purchasing power,” Shiimi said.Legacy tax write-offsThe once-off legacy tax liability write-off – to the tune of N$1.4 billion - will include 13 state-owned enterprises (SOEs) whose funding was severely reduced due to fiscal consolidation in previous years. The beneficiaries include the University of Namibia (Unam), TransNamib, the Namibia Broadcasting Corporation (NBC), New Era Publication Corporation, the Roads Contractor Company (RCC) and Fishcor. Shiimi further sounded a warning to SOEs that government would not entertain any future requests for debt write-offs. “Should any public enterprise accumulate tax liabilities going forward, Treasury is not prepared to offer any support,” he said. Government’s revenue received a shot in the arm, driven by an 11.5% increase in estimates, the minister noted. “We estimate total revenues of N$90.4 billion for FY2024/25, an increase of 11.5% from the revised estimates of the previous year. The substantial boost to revenues stems from a positive adjustment in Southern African Customs Union [SACU] receipts, which is estimated at N$28 billion, significantly better than our initial projections,” he said. Government was also expecting improved revenue marked by increases on - among others - income taxed levied on individuals, Value-Added Tax (VAT) and non-mining company taxes, Shiimi said. “Similarly, several domestic revenue streams have also been revised upwards. In this context, income tax on individuals is estimated to increase by N$1.3 billion over the revised estimates of FY2023/24 [and] VAT is estimated to increase by N$1.7 billion, while non-mining company taxes are estimated to increase by N$759.4 million over the same period,” he said. Government’s revenue streams were further expected to be bolstered by the winding-up of Namibia Post and Telecommunications Holdings (NPTH) and the sale of outstanding government shareholding in mobile operator MTC, which could not be sold with that company’s initial public offering. These are estimated to total N$1.7 billion. Eurobond obligation Government’s spending would also be geared towards paying off existing debt and meeting a N$14.3 billion Eurobond obligation due on 29 October 2025. Overall, government’s total obligations now stand at N$165.8 billion, or 60.1% of the gross domestic product (GDP). “We have observed much welcome stabilisation in the key public debt metrics. However, a significant portion of the government debt portfolio is due for repayment over the medium-term expenditure framework [MTEF]. The largest among these maturities is the Eurobond due on 29 October 2025. This is the largest single-day debt maturity in the history of our country,” Shiimi said. “Government will transmit at least N$3.5 billion during FY2024/25 and some N$2 billion in FY2025/26 of the SACU receipts to a sinking fund to place us in a position to retire two-thirds of the Eurobond (US$500 million) at maturity,” he said. According to the minister, the remaining one-third of the bond (US$250 million) will be refinanced utilising the most cost-effective instrument in the next financial year, cognisant of the prevailing high interest-rate environment and the need to manage debt servicing costs.Tax matters On the tax front, Shiimi announced an increase in the threshold for income tax from the current N$50 000 per annum, to N$100 000, freeing up much-needed disposable income. “This action will result in an injection of N$646 million directly into the pockets of taxpayers. Effectively, all individual taxpayers will be exempted from paying tax on the first N$100 000 of their income as from 1 March.”“We have made provisions in the two outer years of the MTEF to adjust all tax brackets for inflation creep. In this regard, a total of N$712.9 million per annum in direct relief to taxpayers has been provided for,” he added. Other major tax policy interventions include a reduction in the non-mining company tax rate, which will be reduced by two percentage points over the MTEF. “Accordingly, the tax rate will be reduced to 31% effective on 1 January 2024, with a further reduction to 30% taking effect on 1 January 2025,” he said. Appropriation BillAmong the allocations per vote, a total of N$18.4 billion has been allocated to basic education, arts and culture in FY2024/25 and some N$56.1 billion over the MTEF.The budget of the ministry of gender, poverty eradication and social welfare has increased by 23.2% to N$8 billion in FY2024/25. The budget also includes N$824.7 million to maintain the real value of social safety nets in the face of high inflation, and given the high dependence ratio. Accordingly, the old-age and disability grants will be increased from N$1 400 to N$1 600 per month, effective 1 April, Shiimi noted. The higher education vote has been allocated N$4.8 billion in FY2024/25, 13% higher than the preceding year. The additional allocation includes N$200 million to the Namibia Student Financial Assistance Fund (NSFAF), bringing its total allocation to N$2.3 billion and a total of N$7.1 billion over the MTEF. “Furthermore, we have provided N$108.3 million for a 5% salary increment for Unam staff,” Shiimi said.Health and social services will receive N$10.9 billion and a sum of N$34.3 billion over the MTEF. This paves the way for the much-awaited construction of the Windhoek District Hospital, the finance minister said. “Within that allocation, we have availed more than N$450 million in the development budget - including for commencing with earthworks at the Windhoek District Hospital in Havana, the expansion of primary healthcare centres and clinics countrywide and improving the capacity of referral hospital services,” he said. The vote of transport receives a total of N$5.1 billion, geared towards fast-tracking the upgrading of the country’s railway network. This allocation also caters for N$1.8 billion for the completion of ongoing road construction projects, and N$431 million for airport infrastructure. A total of N$1.9 billion in FY2024/25 has been availed to agriculture and land reform. This includes N$50 million dedicated for land purchases to address the plight of generational farmworkers as well as N$87 million for the improvement of animal health and marketing in communal areas.

Shiimi, the money spender

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Namibian Sun 2024-11-22

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Shiimi, the money spender

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Namibian Sun 2024-11-22

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