Shiimi to walk a tightrope
… mid-term budget to focus on Covid-19 mitigation
Local economists expect finance minister Iipumbu Shiimi to focus on the mitigation of the impact of the Covid-19 pandemic and associated social protections when he tables the 2020 midterm budget in parliament today.
Shiimi has the daunting task of directing the recovery of a domestic economy that contracted by 11.1% in the second quarter (year-on-year), which is the largest contraction on record.
The second quarter of 2020 also recorded more than 5 700 retrenchments as businesses grappled with falling revenue in light of virus-linked lockdowns and travel restrictions.
According to economist Mally Likukela, the mid-term budget will be focused on the “need of the day” at the expense of fundamental development issues enshrined in national development plans s uch as Vision 2030,
Harambee Prosperity Plan and the industrialisation agenda.
Likukela explained that the “need of the day” is Covid-19 mitigation, which he expects to take centre stage.
Also, he noted that due to an already eroded state financial position, debt accumulation, which was, unfortunately, the only option, has significantly worsened the budget deficit.
“Given the weak revenue collection over the review period and escalating Covid-19 induced public expenditure, the budget deficit is expected to widen considerably and erode the fiscal position further. Social budgeting will once again remain prominent with funding to education and health taking the lion’s share in this sector. The elephant in the room will remain untouched, that is the huge civil servant wage bill, with little to no sound measures on the way forward to address it. The budget in general will be more biased toward Covid-19 mitigation and not on economic growth and expansion,” Likukela predicted to New Era.
He said going forward, he would like to see government extend market-linked social transfers that will enable beneficiaries to vibrate toward the mainstream economy. These include programmes such as food-forwork, food vouchers (specifically for local procurement), and business start-up-related packages, especially for youth and women.
Likukela continued that these social transfers will not only preserve livelihood but will also form a source of impetus for a journey towards self-sustenance and inclusive economic growth and wealth creation.
Said Likukela: “More funds should then be channelled towards the construction sector and other active economic sectors that have the potential to generate incomes and stimulate vertical and horizontal economic activities. A detailed evaluation or forensic audit must be undertaken to evaluate the impact of the first stimulus package of N$8.1 billion and draw some lessons for future endeavours. The economic rescue package component of the main budget must also be examined to determine its effectiveness as well so that we take stock of the efforts thus far.”
Meanwhile, an economics lecturer at the University of Namibia, Omu KakujahaMatundu, said he expects the minister to heap the blame on Covid-19 for the ailing economy.
“But one would like to hear what the government’s roadmap to economic recovery looks like. Job creation remains the big elephant in the room. Also, one would expect to hear government’s position on ailing parastatals such as Air Namibia, Road Contractors Company, AgribusDev and the list goes on,” said Kakujaha-Matundu.
Also commenting on the mid-term budget expectations, economics lecturer at the Namibia University of Science and Technology, Lameck Odada, said he anticipates a comprehensive economic recovery plan that entails how government will balance the gains reversed by Covid-19.
“How will the job losses be addressed? Is there something detailing reviving the tourism sector? How about education? Just to mention a few. We should also account for the Covid-19 budget. How much was collected and how was it used? Lastly would be the way forward post-Covid-19,” said Odada.