CRITICAL REVIEW OF THE 2011/12 NATIONAL BUDGET PRESENTATION TO NATIONAL ASSEMBLY Thursday, 11 March 2011 Martin Mwinga 1
Knowledge. Creativity. Solutions
BUDGET CONTEXT: Incidence of Poverty by region Namibia’s Unemployment stands at 51%, Poverty rising and inequality high. Kavango Ohangwena Oshikoto Hardap Omusati Omaheke Caprivi Otjozondjupa Kunene Karas Oshana Erongo Khomas Total 0.0%
10.0%
20.0%
30.0%
40.0%
poor
50.0%
60.0%
severely poor
70.0%
80.0%
90.0%
100.0%
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BUDGET CONTEXT: INCIDENCE
OF
POVERTY BY MAIN
SOURCE OF
INCOME
Are there measures in the budget addressing poverty directly?
Pensions
Household Business
Poor
Subsistence farming
Severely poor
Salaries & wages
Total
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
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TARGETED INTERVENTION PROGRAM FOR EMPLOYMENT & ECONOMIC GROWTH (TIPEEG) ECONOMIC GROWTH & JOB CREATION The new government economic growth strategy can be broken down in phases: Short run (1-3 Years): In the Short-run GRN will spend more than N$100 billion to support economic growth and job creation and the following measures are suggested: •Expansionary Economic Policy Package (Fiscal Policy, etc) • Spending on Targeted Infrastructure (for future manufacturing in the medium term); • Subsidies to SOEs and targeted support to private Enterprises to boost production; •Regulatory interventions that effectively address market and state failures
Medium-Term (3 – 5 Years): •Agriculture based manufacturing (Agriculture Value Chain) •Government targeted support program to induce the Private Sector to invest in targeted sectors; • Other Manufacturing activities, where Namibia has comparative advantage;
Long – run (Year 5 & beyond): As full employment is achieved, the state must increasingly reduce its involvement in the economy
and outsource and transfer ownership to private sector; GRN confines its support interventions to knowledge- and capital-intensive sectors in order to remain competitive 4
THE 2011/12 BUDGET ANNOUNCED A NEW ECONOMIC GROWTH PATH TIPEEG PRIOR ECONOMIC SECTORS To boost production in the Agriculture by providing infrastructure, targeted subsidies, agriculture loans, training and skills development. To support the establishment of more tourism facilities, improve the quality of tourism facilities, attract more tourist to Namibia through intensive marketing. To build more roads, improve and expand the railway network To build more houses (6000 unit)
TIPEEG is silent on productive infrastructure such as water supply, irrigation schemes, manufacturing.
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2011/12 NATIONAL BUDGET UNPACKING GOVERNMENT BUDGET EXPENDITURE The 2011/12 Budget makes a provision for an expenditure increase of 30% (excluding interest payments) to N$35, 869 200 from N$ 27, 574 700 in 2010, an increase of N$8, 294, 500. The Increase is spent as follows: Increase by N$3 583 044 to N$13 907 044.
Increase by N$1 803 864 to N$8 372 464. Increases by N$1 248 999 to N$4 295 899. Increase by N$1 211 568 to N$2 983 268. Increase by N$447 million N$6 310 525. 6
2011/12 BUDGET EXPENDITURE ANALYSIS Expenditure Composition 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2009/2010
2010/2011
2011/2012
Total Expenditure
Current Expenditure
2012/2013 Development
2013/2014
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UNPACKING GOVERNMENT BUDGET EXPENDITURE: PRIORITY SECTOR NO 1: AGRICULTURE Allocations to Agriculture 3000000
2500000
2000000
1500000
1000000
500000
0 2008/2009
2009/2010
Total Allocations
2010/2011
2011/2012
Development Expenditure
2012/2013
2013/2014
Current Expenditure
Agriculture Allocations increase by N$749 million in 2011/12 : N$519 million for construction of silos and cold storage facilities, N$230 million for training, administration and other operating expenses. Impact on the economy minimal.
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UNPACKING GOVERNMENT BUDGET EXPENDITURE: ALLOCATIONS TO PRIORITY SECTOR NO 2: TOURISM SECTOR 900000 800000 700000 600000 500000 400000 300000 200000 100000
0 2008/2009
2009/2010 Total Allocations
2010/2011 Operations Expenditure
2011/2012
2012/2013
2013/2014
Development Expenditure
2011/12 Tourism Allocations amounts to N$791 million , an increase of N$443 million. The increase is allocated as follows: N$266 million to Namibia Wild Life Resort (NWR), Namibia Tourism Board: N$70 million, & remaining balance of N$100 million for operations.
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UNPACKING GOVERNMENT BUDGET EXPENDITURE PRIORITY SECTOR NO 3: TRANSPORT Allocation to Transport 3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0 2008/2009
2009/2010
Total Allocation
2010/2011
2011/2012
Development Expenditure
2012/2013
2013/2014
Current Expenditure
Transport Allocations increase by N$1.2 billion in 2011/12 : N$645 million on Roads 10 construction and upgrading, N$270 million for railway maintenance and rehabilitation, N$137 million government services, and other operating expenses.
UNPACKING GOVERNMENT BUDGET EXPENDITURE PRIORITY SECTOR NO 4: HOUSING 965002
741502
603535
453554 343564
81723
2008/2009
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
Allocations to Housing increased by N$287 million in 2011/12. A total of 6000 houses will be built. N$30 million allocated for rural development.
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HEALTH EXPENDITURE ALLOCATION Health Expenditure Allocations 94%
93%
93%
86%
6%
2005/2006
7%
2006/2007
86%
14%
14%
2008/2009
2009/2010
89% 83%
17% 11%
86%
14%
82%
18%
7%
2007/2008
Current Expenditure
2010/2011
2011/2012
Capital Expenditure
2012/2013
2013/2014
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MINISTRY OF EDUCATION BUDGET ALLOCATIONS Education Expenditure Allocation
97%
96%
96%
3% 2005/2006
4% 2006/2007
96%
4% 2007/2008
8%
4% 2008/2009
2009/2010
Current Expenditure
94%
92%
92%
92%
8%
2010/2011
8%
2011/2012
Capital Expenditure
92%
6% 2012/2013
8%
2013/2014
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PRIORITY SECTOR NO.1: AGRICULTURE Agriculture Expenditure Allocation
28%
21%
21%
31%
39%
46% 58%
72%
79%
79%
69%
61%
54% 42%
2005/2006
2006/2007
2007/2008
2008/2009
2009/2010
Current Expenditure
2010/2011
2011/2012
Capital Expenditure
50%
50%
2012/2013
57%
43%
2013/2014
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Budget Financing: GRN Deficit to rise to 9.8% in 2011/12 0
2009/2010
2010/2011
2011/2012
2012/2013
-2
-4
-6
-8
-10
-12
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Revenue Analysis: Namibia Dependent on a Regressive Tax that hats the Poor most GRN estimated revenue for 2011/12 at: N$28 billion Direct Vs Indirect Taxes 25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0 2009/2010 2010/2011 Direct Taxes (Income & Profits)
2011/2012 2012/2013 2013/2014 Indirect Taxes (Consumption/Expenditure Taxes)
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CONCLUSION & SUMMARY ON 2011/12
No details on this Intervention, the targeted sector of Transport, Housing & Sanitation does not have a good multiplier effect. Allocation to Agriculture and Tourism not well targeted. Additional expenditure of N$ 8 expansionary as demonstrated above.
billion
not
The budget deficit at 9.8% and debt to GDP approaching 30% raises questions about sustainability of fiscal policy going forward, in light of revenue constraints & high expenditure that cannot be reduced. A breakdown of allocation to the priority sector shows that we spending money on projects with no or negative multiplier effect, and very little impact on the economy. The high deficit and rising debt not matched by sufficient economic growth – poses major risk that might become difficult to manage. 17
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