October 31, 2003

Government revises budget

Government will not receive as much money as expected during the current financial year. Presenting the revised Budget to the National Assembly, Finance Minister Saara Kuugongelwa-Amadhila announced that income to date was about N$1,2 billion less than estimated. She attributed the shortfall to recent developments in both the local and world economies such as the strengthening of the Namibian dollar against major currencies, and a reduction in estimated revenue from sources such as from company taxes derived from the diamond industry and other mining companies as well as non-resident shareholders' tax.

This also raises the Budget deficit to four per cent of Gross Domestic Product (GDP) - up from about 3,1% as projected for the financial year ended last March. The deficit target Government set for itself in the second National Development Plan is below three per cent. The situation could have been worse if the drop in revenue from the mining industry had not been cushioned by revenue increases through individual taxes (up N$295 million), taxes on profits from non-mining companies (N$275 million), Value Added Tax (N$185 million) and grants from international donors (N$55,9 million). The GDP is expected to drop to 2,9% by year's end, before rising again in 2004-05 to a projected 3,7%. This boost is expected to come from mining industry expansion and a prosperous manufacturing sector.

Export earnings are also expected to rise as the global economy recovers from its slump of 2001. But Kuugongelwa-Amadhila stressed that Government departments still needed to exercise greater restraint in their spending, to bring them in line with the Medium Term Expenditure Framework (MTEF), which sets a spending target of N$11 billion for this financial year. The Finance Ministry has taken this guideline one step further by introducing "medium-term plans" for each ministry, office and agency, favouring programme budgeting at the expense of the current method - itemised budgeting.

The Minister said Government would continue to boost the country's revenue collection by strengthening the revenue department's audit capacity to ensure high compliance with tax laws. Parastatals, she added, would also have to raise and spend money more efficiently as well as improve their quality of service. The embattled national airline, Air Namibia, was receiving priority attention in this regard. (The Namibian, Windhoek)

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