By Staff reporter
Windhoek, March. 2 — Capricorn Asset Management, a member of Capricorn Group, has shared its key comments, reviews, and observations following the budget statement presented by Finance and Public Enterprises Minister, Iipumbu Shiimi, on February 22, 2023.
The theme of 2023/24 financial year’s budget is changing from “consolidation” to “sustainability,” which means that as revenue recovers due to better economic conditions, expenditure is also allowed to grow. This will help economic growth, but it will result in a deficit that will only reach 3% of GDP in five years’ time. The sub-title of the budget is “Economic Revival and Caring for the Poor,” indicating that the focus is on both economic growth and helping vulnerable groups.
Under the theme of Economic Revival, the budget includes a 21.3% increase in spending on goods and services, a 16.7% increase in subsidies and transfers, and a 51.6% increase in capital spending. However, the wage bill is set to rise by only 2.6%, and there will be small tax breaks. Additionally, the threshold below which no personal income tax is payable will rise to N$100,000, and the corporate tax rate will be lowered to 30% by FY26.
Under the theme of Caring for the Poor, the budget includes increases in grant amounts and the expansion of coverage of the vulnerable children grant by another 30,000 children. Old Age, Disability, Orphan and Vulnerable Children, as well as the Conditional Income Grants, will all be increased by N$100 per month.
Total revenue is budgeted to rise by 16.5% to N$74.7bn, while expenditure is set to increase by 13.2% to N$84.6bn in FY24. This will result in a deficit of N$9.8bn, equal to 4.6% of GDP. It is estimated that the deficit will decline to 3.8% by FY26. If a “consolidation” stance were still in effect, the decline in the deficit would have been faster. Nevertheless, funding pressure on the domestic market will reduce sharply.
Revenue is expected to rise significantly due to a surge of 71.6% in SACU receipts to N$24.3bn, making up 32.6% of the total. Personal Income Tax (PIT) is set to rise by 3.0% to N$16.7bn, 22% of the total, while Corporate Tax (CIT) is expected to increase by 8.6% to N$8.8bn, 11.8% of the total. Indirect taxes such as VAT and the Fuel Levy are budgeted to rise by 5.5% to N$16.7bn or 22% of the total. No new taxes will be implemented, and the focus will instead be on administrative reforms and tax compliance. The usual hikes in sin taxes will take immediate effect.
Total expenditure is estimated at N$84.6bn in FY24, growing by 13.2%. This growth is driven by spending categories outside of the wage bill, which is comforting since it has been a source of concern in the past. By FY26, it should have declined to 42.8% of revenue if the forecast of the MoF holds. The budget goes through the usual review of sectoral allocation, which is largely by the Ministry. The total interest bill is set to rise by nearly 10% to N$10bn, equal to 13.4% of revenue. This is the result of increased borrowing to finance the budget deficit, but it is still manageable.
Overall, Capricorn Asset Management views the 2023/24 budget as positive, with a focus on economic growth and helping vulnerable groups. The increase in spending on goods and services, subsidies and transfers, and capital spending should support economic growth, while the increase in grants and coverage for vulnerable groups is a positive social development. The small tax breaks and administrative reforms are also encouraging, and the absence of new taxes is welcomed. The budget deficit is higher than in previous years, but it is still manageable, and funding pressure on the domestic market is expected to reduce. The growth in spending categories outside of the wage bill is also a positive development, as the wage bill has been a source of concern in the past. Overall, the budget sets a positive tone for Namibia’s economic recovery and sustainability.
