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Polity
Article by: Site Administrator
Published: 15 Mar 2007
Namibia: Kuugongelwa-Amadhila: Budget speech (15/03/2007)
Date: 15/03/2007
Source: Namibia government
Title: Budget speech
Opening Remarks
Honourable Speaker, Honourable Members
1. We have yet again completed a budget cycle and I am honoured to
table the Budget for the 2007/08 financial year and Medium Term
Expenditure Framework covering the years 2007/08 to 2009/10.
2. As was the case during the past year, we are again in the situation
where revenue collections have increased significantly and our share
from the SACU customs union pool exceeded expectations. I am
appreciating that this situation is opportune, but unfortunately it may
not last for long and I shall elaborate as to how we can make the most
of this windfall.
3. Reflecting briefly on the past years' performance, I am pleased to
state that our policy interventions are yielding the desired results. We
had introduced several measures aimed at reducing poverty, and as a
result the Gini Coefficient for Namibia has dropped from 0.7 to 0.6.
We achieved an estimated GDP growth of 4.7 percent over the past
five years. We managed to bring public debt down to 31.4 from 34
percent in 2005 and below the 33.1 percent projected under the
current MTEF. The policy mix of pro-poor economic growth and
fiscal consolidation proved to be the right approach. We managed to
deliver on both.
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4. We are in the third year of programme budgeting and there is growing
appreciation and understanding of this approach. The donor
community has moved towards budget support and the sector wide
approach, both being made possible through programme budgeting.
Offices/Agencies/Ministries can show how public resources are
allocated to priorities and how much expenditure impacts on
outcomes. We are however still not yet at the desired levels and
further efforts are required to reap the full benefit from this
transparent and more efficient way of resource allocation.
Honourable Speaker
5. In his new year's message, H.E. Hifikepunye Pohamba, The
President, amongst others said, and I quote "We in Government are
mandated by the electorate to manage public resources for the benefit
of all our people. In turn and justifiably so, our people expect us to
deliver in terms of the undertakings that we have made".
6. The SWAPO-Party Government's policy of human-centred
development is encapsulated in His Excellency's statement. The
commitment to reduce poverty, create jobs and facilitate equitable
opportunities for all remains central to all government activities. To
give effect to this education, health and social welfare are prioritised
in public spending. The productive sectors equally receive significant
budgetary allocations mainly for infrastructure development.
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7. As a responsible Government, we are in for the long haul and our
development agenda aims at achieving lasting outcomes. This budget
therefore reiterates priorities of the previous budget; and that is to
accelerate economic growth which is pro-poor. Unfortunately,
however, economic growth in Namibia has not generated a
commensurate growth in employment. We therefore want to ensure
that economic growth translates into improved employment growth.
To achieve that, we continue to invest heavily into our human capital.
In doing so, we must improve educational outcomes and with that,
skills levels and employability. We are addressing the pressing needs
of the health sector, where HIV/AIDS is still threatening to undo
many of our developmental achievements. Our continued investment
into the social safety net will provide relief to the most vulnerable
such as the elderly and OVCs. This will contribute to the lifting of
living standards of our communities.
8. Further, the enhanced infrastructure development programme will
create new job opportunities and stimulate higher economic growth in
the undeveloped rural areas.
9. As engines of economic growth, the productive sectors will receive a
significant boost to unlock untapped opportunities especially in
Agriculture, Tourism and Aquaculture.
Honourable Speaker
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10. All our developmental priorities can only be achieved in an
environment of macroeconomic stability. It is, therefore, a
prerequisite to ensure that this essential stability is maintained.
11. Over the past three years we have managed to consolidate our
financial situation. This was made possible due to Namibia's share
from the SACU Revenue Pool exceeding projections, the much
improved tax collections and the windfall from the sale of MTC
shares. Total debt was projected to reach at 33.7 percent of GDP at the
end of the 2006/07 financial year. However, the more favourable
revenue outturn enabled us to reduce the debt stock to 31.4 percent.
12. For the 2007/08 financial year, this positive trend in revenue is
expected from both international and domestic taxes. The resulting
surplus is earmarked for scaling up our development programmes to
ensure that all our people share in this extra ordinary revenue
windfall. However, we shall also use a part of this windfall to reduce
public debt.
13. With the SADC Free Trade Area and Customs Union on the horizon
by 2008 and 2010 respectively, a significant drop in revenue from
international taxes is foreseen. This means that the period of revenue
windfalls is coming to an end. However, expenditure is projected to
grow during the MTEF period and, therefore, a strategy for
maintaining fiscal sustainability has to be put in place.
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Honourable Speaker
14. The compelling reasons for continued expenditure growth are to be
found in the seriously skewed economy of our country and the
resulting needs and demands to level out this injurious bias.
15. A part of this strategy is to utilise the windfall revenue to significantly
reduce debt. This in turn will create flexibility in Government's fiscal
ability to raise additional funding through borrowing during periods of
decreased public revenue without compromising fiscal sustainability.
16. Another component of the strategy entails the ongoing efforts to
optimise revenue collection through improved tax law enforcement.
17. Thirdly, accelerated economic growth is achieved through expanded
and well targeted public expenditure. This will in turn broaden the tax
base. Lastly, foreign and domestic private sector investment is
stimulated by deepened regional integration.
Pro-Poor Policies underpinning the MTEF
18. The budget for 2007/08 and the corresponding MTEF continue to
address the challenges of poverty reduction and sustainable economic
growth. In this context, I wish to announce the following pro-poor
policy interventions.
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Tax Threshold
19. To relieve the tax burden of low income earners in our society, we are
proposing to lift the threshold for taxable income from N$24,000 to
N$36,000. This means that as from 2007/08 onwards, individuals
earning below N$36,000 will be exempted from paying income tax.
This will increase the take-home part of any salary earner and with
that the buying power of especially those in the lowest income
brackets.
Allowable deductions for Pension contributions
20. The need to adequately provide for financial security after productive
employment is critical in any society. In order to improve the ability
of employees to cater for their pension needs adequately, I propose the
deduction allowable for retirement contributions to be increased from
the current N$30,000 per annum to N$40,000. This will also provide
an incentive towards increased savings.
Social Safety Nets
21. Last year, I was able to announce a substantial increase of 23 percent
in the value of social pensions. This year, additional funds are being
made available for a major expansion in the provision of grants and
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allowances for orphans and other vulnerable children. This enables us
to provide coverage to an additional 78,000 orphans and vulnerable
children during the MTEF.
22. Last year, I also announced that more resources are to be made
available to hospitals to roll out the AIDS treatment programme. For
this MTEF, we are providing a further N$450 million to extend the
programme further. We are committed to ensure that all Namibians in
need of anti-retroviral treatments are able to access it.
23. We are making additional resources available to improve education
and training through the ETSIP programme. In this regard, the
expectation is to not only improve access to education but also to
improve educational outcomes.
Pro-Growth Policies
24. The Green Scheme and Aquaculture both have their part to play in
stimulating the rural economy. Government will continue to play a
leading role with the development of the necessary infrastructure and
operations including, where appropriate, marketing and research.
Monies are also being made available to stimulate best use of
communal lands.
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Infrastructure Development
25. Infrastructure Development, especially in rural areas, is a prerequisite
for economic growth. Public funds are to be significantly increased
through the Development Budget to implement several major
infrastructure development projects. The bulk will be invested in the
national road and rail networks.
26. This year we are utilising a significant portion of the anticipated
revenue windfall to implement a number of additional infrastructure
projects, thus providing for better access to all parts of our vast
country. The Development Budget is therefore expanded by N$800
million under the MTEF.
27. Last year, we invested N$250 million in Nampower towards meeting
the country's power needs. This year, an additional N$500 million is
allocated to ensure that the programme is accelerated. A total
budgetary allocation of N$1 billion will be reached at the end of the
MTEF.
28. To add impetus to the land reform programme, we shall assist
Agribank to raise N$500 million in order to strengthen its balance
sheet. Of this, N$150 million will be a capital injection and N$350
million will be in the form of sovereign guarantee. In addition, we are
finalising a review of the AALS that will enable us to improve the
implementation and outcome of the programme.
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29. The Development Bank will receive N$29 million as further
capitalisation aimed at strengthening the Special Development Fund
which is a vehicle for SME support. The winding up of NDC is
nearing finalization and we envisage the transfer of NDC assets to
DBN within the next month. At this point I wish to repeat the
Government's call to the private sector to invest part of the savings
under their management in the Development Bank. This would stem
the continued outflow of capital and ensure that national savings
support local development.
Amendment of Regulation 28 of the Pension Fund Act and Regulation
15 of the Long-term Insurance Act
30. In my previous budget speech, I announced legislative amendments to
Regulation 28 and 15 of the Pension Funds Act and Long-term
Insurance Act, respectively. These amendments will be gazetted in
2007/08 financial year.
31. The salient features of the proposed amendment are, firstly, that
pension funds and long term insurers are obligated to take up a
minimum investment of 5 percent in unlisted shares in Namibia.
32. It is further envisaged that the qualification of dual-listed shares for
Namibian asset status be gradually reduced to 10 percent.
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Fiscal Sustainability
Expenditure Policies
33. I have mentioned the importance of maintaining macroeconomic
stability. In the past we have experienced pressures from both the
expenditure and revenue sides, and therefore our policy interventions
need to accommodate both sides of the equation.
34. With regards to expenditure, the main objective is to achieve levels of
acceptable value for money. Government, through the Office of the
Prime Minister, is implementing a performance based management
system. The objective is to identify areas of low productivity within
the public service and counteract with corrective measures.
35. In order to get value for money from parastatals, Government has
adopted the principle of targeted subsidies. This means that subsidies
will be targeted to specific programmes and outcomes.
Debt Policies
Honourable Speaker
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36. Our debt strategy does not only focus on raising additional funds for
Government, but it also seeks to promote the development of our
domestic capital market.
37. In this regard, Government will keep a presence in the capital market.
Government will further assist able parastatals to develop debt
instruments so that they can actively participate in the capital market
and contribute to its development.
38. Significant progress has been made in restructuring public debt in
order to mitigate maturity risks.
39. At the end of 2006/07, the debt stock maturing within 12 months is
estimated to stand at N$3.9 billion, or 10 percent of GDP down from
11.9 percent in 2005/06. A large part of the current short term
domestic debt is made up of the GC07 bond to be redeemed in full in
July 2007. Currently, the required funds of N$1.2 billion has already
been put aside for redeeming this bond when it matures in July 2007.
Moreover, measures for the redemption of the GC08 are also in place.
40. Equally important is the maintenance of a sustainable balance
between domestic and foreign debt in order to mitigate foreign
exchange risk.
Exchange Control Changes
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41. The Government will continue with the gradual process of exchange
control liberalization in tandem with the liberalization measures in the
CMA and in meeting its commitment towards full liberalization
amongst SADC member states.
42. I am pleased to announce the following changes in the current
exchange control regime:
43. Special exemption will now be granted to potential oil and gas
companies whose sales relate to exploration and production from the
requirement of operating Customer Foreign Currency Accounts. This
means that companies involved in this trade can now operate
Customer Foreign Currency accounts without any restrictions on the
nature of transactions passing over that account or compliance with
the 90 days rule.
44. With the view to reduce the transaction costs associated with the
current Multi-Customer Foreign Currency accounts and their
restricted use, companies involved in international trade may now
operate a Single-Customer Foreign Currency account for both trade
and services, and can use it for a wider variety of permissible
transactions.
45. The current threshold of N$250,000 for "cash with order" payments
per transaction by Namibian importers has been increased to
N$500,000 with immediate effect.
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46. To encourage strategic international partnerships, Namibian corporate
investing outside the Common Monetary Area will no longer be
required to obtain a majority shareholding in foreign entities and/or
projects, but must obtain a shareholding of at least 25 percent.
Tax Legislation Amendments
47. Government tax policies are aimed at maintaining a balance between
promoting economic growth and poverty reduction on the one hand,
and optimising revenue collections on the other. I have already
referred to the lifting of the threshold of taxable income to produce
relief to tax payers in low income brackets. Other amendments to the
Income Tax Act include the withholding of tax rate on interest income
and the reduction of the tax rate on this income to 10 percent.
48. Further, the interest calculation on tax arrears will be changed from
compound to simple interest, thereby providing relief to taxpayers
again.
49. The Transfer Duty Act will be amended in order to prevent the
avoidance of transfer duty through the use of Close Corporations in
real estate transactions.
50. The VAT amendment Bill is already before this House and I shall not
elaborate any further on it. The Income Tax Amendment Bill and the
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Transfer Duty Amendment Bill are still to be introduced to Parliament
during the 2007/08 financial year.
51. With regard to the newly established Tax Tribunal, the Chairperson
has been appointed and the Tax Tribunal will have its first session at
the end of March 2007.
Excise Duties
52. In pursuance of our commitments under the 2002 SACU Agreement, I
wish to announce the following nominal percentage increases in
Excise duties that have been implemented as from the 21 February
2007.
Description Percentage (%)
Unfortified wine 8.5%
Fortified wine 10%
Sparkling wine 10%
Ciders & alcoholic fruit beverages 8%
Spirits 10.5%
Cigarettes 10.71%
Cigarette tobacco 5.32%
Pipe tobacco 5.76%
Cigars 10.46%
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International and Regional Economic Blocks
Honourable Speaker, Honourable Members
53. Namibia is a member of SADC and SACU.
54. Through SACU, Namibia signed on 16 December 2004 a Preferential
Trade Agreement establishing a legal framework to govern trade
relations between SACU and MERCOSUR.
55. The SACU-EFTA negotiations have been concluded and the
Agreement was signed between July and August 2006 by individual
Member States. Internal ratification processes are currently underway
and the implementation date should be announced soon.
56. Negotiations between SACU and the USA for a FTA could not be
finalised within the set time framework due to non conclusion of a
number of important issues. The two parties have agreed to continue
engagement through a non-negotiating consultative mechanism.
57. As a member of SADC, Namibia is party to the SADC/EPA
negotiations. The current trade preference granted to ACP Countries
under COTONOU expires at the end of 2007. This presents a special
challenge for SADC and EU to conclude negotiations on the EPA in
order to promote the trade agenda between the two blocks after the
expiry date.
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58. Namibia's long term development targets are, like those of other
developing countries, dependent on the extent to which it can access
international markets for its goods and both the SADC/EU, EPA's and
World Trade Organisation's Trade Negotiation are the principal
vehicles for the achievement of these important goals. It is therefore a
serious concern that progress on both of these fronts is slow.
Global Economic Performance and Outlook
59. The Global economy recorded a moderate growth rate of 4.9 percent
in 2005. Performance is estimated to have strengthened in 2006
despite numerous downside effects, such as high oil prices, political
upheavals as well as threats to oil production in the Middle East. The
output is estimated to increase by 5.1 percent in 2006, and it is
projected at 4.9 percent in 2007.
60. Amongst the key drivers of this global economic growth are advanced
economies such US, Japan, Euro Zone and other emerging economies
such as China and India.
61. In Africa, most economies performed well in 2005, recording an
average growth rate of 5.8 percent, but eased to 5.2 percent in 2006.
This expansion was largely attributed to a surging growth in oil
producing countries. The continent's economic growth rate is
projected at 5.9 percent in 2007.
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62. The South African economy, recorded a growth rate of 4.9 percent in
2005 and is estimated to have grown at the same rate in 2006. In 2007,
the growth rate is projected to decelerate to 4.8 percent. The annual
average inflation rate was 3.2 percent in 2005 but is estimated at 4.6
percent in 2006. The South African bank rate remain s on par with that
of Namibia since 2004, and was at 9.0 percent at the end of 2006.
Domestic Economic Performance and Outlook
63. Against this backdrop of favourable global and regional economic
performance, the Namibia economy recorded a favourable growth of
4.2 percent in 2005. An inflation rate of 5.1 percent and a strong
current account surplus was also recorded. Economic performance
remained robust in 2006 with an estimated growth rate of 4.6 percent,
originating mainly from primary industries.
64. Growth in primary industries originated from the mining sector which
grew at an estimated rate of 13.6 percent in 2006. This growth was
driven by the strong demand for diamonds and other base metals in
the world market. Agriculture and fishing sectors are expected to
decline during that year by 2.8 percent and 0.5 percent, respectively.
The decline in the agricultural sector originates from the livestock
sub-sector that saw a decline in the numbers of cattle marketed as a
result of livestock restocking after a good rainy season. Furthermore,
cereal production has declined due to the effect of floods in the
Eastern Caprivi. The fishing sector hardly recovered in 2006 due to
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high costs in terms of fuel needed for vessels and declining fish
stocks.
65. Secondary industries are expected to be resilient despite the negative
developments in agriculture and fishing. Output in the manufacturing
sector is expected to grow by 3.1 percent in 2006 after a decline of 0.6
percent recorded in 2005, while the construction, water and electricity
sectors are expected to grow by 7.5 percent and 2.8 percent,
respectively.
66. Tertiary industries showed strong growth and improved contributions
to GDP during 2006. Within the service sectors a growth of 9.8
percent is expected in 2006, from transport and communication.
Wholesale and retail trade grew with 4.5 percent and hotels and
restaurants also with 4.5 percent.
67. An average GDP growth rate of 4 percent is expected for the MTEF
period. For 2007 a growth rate of 4.9 percent is expected, which is
higher than originally projected.
68. The Balance of Payment for 2006 reflects a healthy economic position
as indicated by a surplus. This surplus is a result of the positive
current account balance of N$7.7 billion, which is attributable to the
higher export earnings and SACU receipts. However, the capital and
financial accounts deficit increased from N$3.1 billion in 2005 to
N$7.1 billion in 2006. The deterioration of this component was caused
by higher capital outflows.
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69. The annual inflation has increased from 2.2 percent in 2005 to an
estimated 5.1 percent in 2006. This increase is mainly due to
persistent high and volatile oil prices. However, monetary policy
tightening has managed to curb further inflationary pressures.
Inflation is expected to remain within single digit levels. However,
developments in international oil prices will continue to pose a major
risk to Namibia's inflation outlook.
70. Interest rates reached 9.0 percent in December 2006, up from 7.5
percent in June the same year. This followed developments in the
South African currency, to which Namibia's currency is linked.
Financial Sector Charter
71. Some progress was made towards developing Namibia's financial
sector charter.
72. I am concerned, however, that the Charter's formulation is yet
uncompleted long after the initial target date of September 2006. I
again urge the industry to ensure that the latest target date of the end
of this month for the completion of the Charter is met.
73. A persisting matter of concern is the very high transaction costs in the
financial sector. For instance, it cannot be right that a person gets out
less than deposited into a savings account. I expect that the Financial
Charter will give serious attention to excessive transaction charges by
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our financial institutions. I look forward to the outcome of the debate
on the report of the Parliamentary Committee on Economics and
Natural Resources on this issue.
Sovereign Credit Rating
74. In 2006, Fitch Ratings affirmed the Republic of Namibia's credit
ratings at foreign currency Issuer Default 'BBB-' (BBB minus), local
currency Issuer Default 'BBB' and Short-term foreign currency 'F3'.
Both the Issuer Default ratings ("IDRs") have Stable Outlooks. The
Country Ceiling improved from "A-" to 'A'. This affirmation confirms
Namibia as a safe and reliable investment destination.
75. Fitch Rating however identified areas to be improved including the
following:
- High capital outflows, which deprive the country of foreign
reserves.
- Social challenges, including high unemployment, a highly
skewed income distribution and high relative poverty and
HIV/AIDS.
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Honourable Speaker, Honourable Members
Fiscal Review of 2004/05 - 2006/07 Medium Term Expenditure
Framework
76. Before I dwell on the allocations under the next MTEF, let me share
the fiscal review of the 2004/05 - 06/07 Medium Term Expenditure
Framework with the House.
77. The MTEF under review was marked by positive developments in
revenue collection, which as a share of GDP, stood at 30.6 percent
and 33.1 percent for the financial years 2004/05 and 2005/06,
respectively. The positive trend was supported by the improved
collection in the categories of tax on income and profit, value added
tax and tax on international trade. Furthermore, measures
implemented by the Ministry, such as the forensic tax audits and
training of tax administrators, yielded positive results.
78. Total Expenditure as a ratio of GDP stood at 34.2 percent in 2004/05
and 33.3 percent was recorded in the following year. The overall
expenditure trend was stable during the MTEF and this could be
attributed to expenditure control measures introduced by Government.
79. Public debt as a share of GDP stood at 33.2 percent in 2005/06, lower
than the debt of 33.8 percent in the preceding financial year.
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80. Turning now to the preliminary outturn of 2006/07 financial year,
Honourable Speaker, late in 2006, I tabled a Revised Budget with
the main aim to re-allocate resources for the improvement of
conditions of service for civil servants from the Vote of the Prime
Minister to the various Votes. Overall, the Additional Appropriation
comprised additional allocations for the operational budget amounting
to N$132.6 million. This brought the Main Budget for 2006/07 of
N$15.2 billion to a total Revised Budget of N$15.3 billion, or 0.8
percent higher than the Main Budget.
81. Total revenue projections for the 2006/07 financial year were
significantly raised in the Revised Budget, from N$15.3 billion to
N$16.2 billion and that is 6 percent higher than originally anticipated.
The main drivers of this increase in revenue are receipts from SACU,
which increased by N$322 million, and the one-off proceeds from
MTC shares sale of N$648 million. As of January 2007, the
preliminary outturn of total revenue collected amounted to N$13.6
billion, which is on target. Contributing to this performance were
revenue components on taxes raised from diamond companies,
international trade, value added tax, and non-tax revenue.
82. Turning to the total expenditure, as I have already indicated, the
Revised Budget for 2006/07 stands at N$15.3 billion including
statutory payments. Of this total, N$11.9 billion covers operational
expenditure and N$1.9 billion is earmarked for development
expenditure. The balance of N$1.3 billion is provided for interest
payments.
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83. The preliminary outturn indicates an amount of N$8.5 billion spent on
the operational and N$919.5 million spent on the development budget
so far. These preliminary figures indicate that O/A/Ms are managing
cautiously their spending. Expenditure on domestic interest, which is
N$1.05 billion is lagging behind the estimates by N$176 million due
to the positive fiscal outturn. At the end of March 2007, total
expenditure is estimated to be around 34.7 percent of GDP, which is
on target with projections.
84. With regard to the Budget Balance, we have budgeted for a surplus
of 2.1 percent in 2006/07. The preliminary outturn for revenue and
expenditure gives an indication that such a surplus will be realized.
85. Total public debt is estimated at N$13.8 billion for 2006/07 financial
year. This comprises N$425.6 million of loans raised outside the
Budget. As of December 2006, total public debt stood at N$13.5
billion or 30.4 percent of GDP.
86. As for Contingent Liabilities, during 2006/07, we have managed the
contingent liabilities at a low rate of 8.9 percent, below the benchmark
of 10.0 percent. Domestic guarantees increased from 3.6 percent in
2004/05 to 3.8 percent in 2005/06, followed by a further increase to
4.2 percent in 2006/07. During 2006/07, amounts of N$ 240 million
and N$120 million guarantees were issued on behalf of Air Namibia
and Namibia Wildlife Resorts, respectively.
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87. Foreign guarantees increased from 2.9 percent of GDP in 2004/05 to
5.1 percent of GDP in 2005/06. This increase was mainly due to new
guarantees issued to secure Air Namibia's lease of aircrafts for the
total amount of USD 139 million. During 2006/07, foreign guarantees
are expected to decrease to 4.7 percent of GDP.
Medium Term Expenditure Framework for the period 2007/08 -2009/10
88. The 2007/08 - 2009/10 MTEF and the proposed budget for the
coming financial year reflect the commitment of the SWAPO Party
Government to achieve the national development objectives and
improve the socio-economic conditions of the people of Namibia
through a frontal attack on the challenges of poverty, inequality in
income distribution, unemployment, imbalanced development in the
regions, and HIV/AIDS.
89. After a lengthy process of negotiating the numerous requests for
additional expenditure during the MTEF 2007/08 - 2009/10, I am
finally able to lay before this Honourable House the proposed budget
for 2007/08 and the corresponding MTEF for the period 2007/08 -
2009/10.
Revenue Outlook
90. Before I proceed to the allocations to specific votes, I shall shed light
on the total estimated revenue envelope for the MTEF.
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91. Total revenue and grants for the MTEF is estimated to reach an
amount of N$51.8 billion. Of this amount, N$47.9 billion is from tax
revenue, N$3.4 billion from non-tax revenue, N$72.5 million from the
return on equity, and grants through budget will contribute N$488.9
million. For each respective financial year, total revenue and grants is
projected at N$18.4 billion, and then drop to N$16.6 billion and
N$16.9 billion.
92. For 2007/08, the total revenue and grants represents an increase of
13.4 percent compared to the revenue estimate for 2006/07. Total
revenue and grants as a share of GDP will be 36.3 percent in 2007/08;
thereafter it is forecast to drop to 30.1 percent in 2008/09 and 28.6
percent in 2009/10.
Expenditure Outlook
93. Within the above resource envelope, Total Expenditure for the MTEF
is projected at N$52.5 billion. Of this amount N$43.1 billion is for
Operational Expenditure, N$5.8 billion for Development Expenditure
while statutory obligations account for N$3.6 billion. The breakdown
of Total Expenditure per financial year is as follows: N$17.8 billion in
2007/08; N$17.1 billion for 2008/09 and N$17.5 billion for 2009/10.
As a share of GDP, total expenditure is projected to record a
downward trend of 35.2 percent, 31.2 percent and 29.7 percent in
2007/08, 2008/09 and 2009/10, respectively.
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94. To complement the Government's endeavours for sustainable
development, external funding of N$1.9 billion over the MTEF period
has been secured from Development Partners. These grants are
outside the State Revenue Fund and will be used to implement
development projects. Moreover, Government is committed to raise
N$978 million through foreign loans at concessional rates.
95. Government is currently negotiating additional concessional loan
funding, which would allow public expenditure to be supplemented
when revenues decline as from 2008/09.
96. Even though we have provided for a surplus of about N$559.4 million
in 2007/08, the overall budget balance for MTEF is projected to be a
budget deficit. In absolute terms the MTEF deficit is estimated at
N$682.4 million, which is 1.1 percent as a share to GDP.
97. Taking into consideration the estimated borrowing and the above
referred debt redemption partly funded with the surpluses, the Total
Debt amounts to N$12.5 billion in 2007/08; N$13.0 billion in 2008/09
and N$14.1 billion in 2009/10. As a share of GDP, the total debt is
around the debt target of 25 percent, on average during the MTEF.
MTEF Allocations
98. Let me now turn to some of the major programmes funded under the
MTEF. I will not refer to all Votes' ceilings as these are contained in
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the Bill and the MTEF document. The fact that some Votes are not
mentioned is simply to save time and not to diminish their importance.
99. Education and Health continue to take the lion's share of the budget
resources, scooping N$11.7 billion and N$5.5 billion respectively.
100. The Vote for Regional and Local Government, Housing and Rural
Development receives N$1.1 billion for the MTEF period. Amongst
the urgent priorities facing this Ministry is the need to the face out the
inhumane and unhygienic buckets system, expand provision of shelter
in poor communities, support development in small, upcoming towns
and villages and promote development of rural unserviced areas.
101. The productive sectors of Mines and Energy, Trade and Industry,
Fisheries, Agriculture and Tourism will receive a total amount of N$4
billion. This allocation will boost economic growth and job creation.
102. Transport infrastructure will receive N$1.8 billion over the MTEF
period towards the development of national roads and rail networks.
Additional loan funding is being negotiated to close existing funding
gaps that would raise total funding to this sector significantly.
103. The Police will receive an additional amount of N$3.1 billion to
improve law enforcement and for the combat against crime.
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104. To enhance the rule of law and to reduce the backlog in court cases a
total amount of N$685 million is allocated to the Vote of Justice and
Attorney General for the MTEF period.
105. An amount of N$1.1 billion has been allocated to the Vote or Works
for the management and upkeep of Government fixed assets.
106. The realization of public programmes is dependent on availability of
resources. The Ministry of Finance will receive additional funding to
improve revenue collection through strengthened tax law enforcement
and tax administration. It is envisaged to acquire scanning equipment
for the various border posts to improve customs administration. IT
systems and staff capacities will be upgraded in order to improve tax
administration. The costs for medical aid continue to escalate and
necessitated an additional allocation.
107. The allocation to the Office of the Auditor General has been allocated
N$78.8 million for the MTEF period to ensure that public resources
offer value for money and that public expenditure is properly
accounted for and to clear up the backlog in audit reports.
108. We commissioned an independent study in October 2006 to assess the
viability of Air Namibia as a business in an effort to restructure the
company. The report of the consultants has been tabled with
Government and internal consultations are ongoing.
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109. To enable the company to continue its operations in the meantime, we
have made provision for some support under the budget. In addition,
Air Namibia's debt will be ringfenced and serviced by Government.
Special Authority
110. Honourable Speaker, in order to meet the funding requirements of the
recently created Ministry of Veteran Affairs, I issued a Special
authorization to the amount of N$7.453 million. This was issued in
terms of section 9(1)(b) of the State Finance Act. I herewith in Terms
of Section 9(2) of the State Finance Act request the National
Assembly to appropriate this amount as part of the appropriation for
the financial year 2007/08 to the Vote of Veteran Affairs.
Conclusion
Honourable Speaker, Honourable Members
111. In concluding, I want to quote from the foreword to Vision 2030, by
the Founding Father and former President, HE Dr Sam Nujoma.
112. "Our future is about the people. Therefore, at the centre of the
visionary exercise is concern for the population in relation to their
social (particularly health), economic and overall well-being".
113. This budget and the corresponding MTEF put the well-being of our
people at the centre. We need to improve their living standards and
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therefore our intervention must be pro-growth for the poor. Equally
we may not allow that what we have achieved so far is eroded away
and therefore our intervention must be sustainable.
114. I want to take this opportunity to thank H.E. The President, Comrade
Hifikepunye Pohamba and the Right Honourable Prime Minister,
Comrade Nahas Angula for their support. My Cabinet Colleagues
fully participated in the consultations leading up to developing the
Budget for the 2007/08 financial year and the corresponding MTEF
and I thank them also for their contributions. It was a give and take
process where all of us had to accept compromises, but where we held
the peoples' interest always as top priority. My gratitude also goes to
all the officials who participated in preparing and compiling the
budget and MTEF.
Honourable Speaker, Honourable Members
115. I believe it is an opportune occasion to place on record our gratitude
to all our Development Partners, who with their assistance have
proven their solidarity with our people and our needs to improve
living standards.
116. It is now my pleasure to table the Appropriation Bill for 2007/08 and
the MTEF for the financial years 2007/08 - 2009/10 before this
August House for its consideration and approval.
117. I thank you!