By Ruusa Nandago
The Minister of Finance and Public Enterprises, Iipumbu Shiimi, tabled the FY24/25 national budget to parliament on 28 February 2024 ahead of a key election year, amid an ongoing drought, sluggish non-mining growth and a less supportive global backdrop.
The budget is underpinned by three priority policy pillars: 1) stimulating domestic demand, 2) accelerating investments in productive public infrastructure, and 3) cultivating fiscal prudence.
The Ministry of Finance (MoF) expects stronger economic growth of 5.6% y/y in 2023, 4.0% in 2024 and 3.9% in 2025, driven by oil and gas exploration and uranium production – in line with our expectations.
Fiscal revenue is expected to increase by 11.5% y/y to NAD90.4bn in FY24/25 (c. US$4.7bn; 32.8% of GDP) from NAD81.1bn in FY23/24 on the back of higher Southern African Customs Union (SACU) receipts, personal income tax, non-mining company tax and value-added tax (VAT).
A number of tax policy reform measures intended to provide relief to both individuals and corporates and to improve administrative efficiency will be implemented.
Expenditure is projected to rise by 11.9% to NAD100.1bn (c. US$5.2bn; 36.3% of GDP) in FY24/25, from NAD89.5bn in the prior year on the back of civil service wage increases, higher welfare spending, an increase in development spending and higher interest rate costs.
Given the revenue and expenditure dynamics, the budget deficit for FY24/25 is estimated to widen to NAD8.9bn (c. US$462.6m) in nominal terms, from NAD7.8bn in FY23/24, but it will remain unchanged relative to GDP at 3.2%.
Similarly, the total debt stock for FY24/25 will increase in nominal terms to NAD165.8bn (c. US$8.6bn) from NAD154.2bn in FY23/24. Relative to GDP, debt is estimated to reach 62.5% of GDP in FY23/24, down from 66.2% in FY22/23. Going forward, the ratio is expected to continue decreasing, to 60.1% in FY24/25, 56.8% in FY25/26 and 56.4% in FY26/27. The significantly lower ratio compared to previous estimates is due to strong nominal GDP growth, outpacing the increase in debt stock.
By Ruusa Nandago is FNB Namibia’s Economist