We have weathered perfect storms in the past
The Minister of Finance, Hon Calle Schlettwein last week told Parliament his ministry is introducing austerity measures to counter the shortfall in government revenue. It is commendable that the minister addressed the current mini-crisis in a neutral, analytical manner and not fell into the trap his colleagues are so fond of – to come up with yet another grand scheme with yet another popular label to paper over the seriousness of the situation.
“We have to contend with a considerably lower than anticipated revenue outturn, due to weaker economic output. As a result of the shortfall in GDP and revenue during the FY2015/16, the fiscal indicators have changed; with the budget deficit for that year now estimated at about 8.3%, up from the 5.3% deficit that was budgeted for, while the public debt ratio has also risen to about 40% of GDP. This out-turn has carried over to the current fiscal year and needs to be contained.”
This paragraph from the minister’s speech says it all. Whatever the reasons, the government has to contend with a rather drastic decline in revenue and as a result, all the macro-economic ratios in the budget have changed, some significantly so. The minister did not shy away from the realities nor did he try and exonerate either himself or the government. Despite exogenous conditions beyond our control, his message was clear: We created the mess and we will solve it.
In what is not typical for the level of information imparted to the members of the law making body, the minister then delved into a host of fairly technical and even downright complicated issues to make his co-governors understand that for now there is no money, or at least, none to waste.
When such a sober assessment comes from such a high-ranking minister, one wonders why is it necessary for our rulers to first antagonise the private sector before realising it is the most loyal partner in the Namibian house.
The private sector is not the government’s enemy, it is its ally. Why then, does the government attack the private sector as if it is an adversary.
I was so happy reading through the minister’s statement to see the voice of reason has returned to the circles where our economic fortunes are determined. His message is quite a relief from the usual quasi-communist rhetoric that flows from so many elected officials.
While personally, I do not think central planning is a good thing or that it can last indefinitely, I am also a realist recognising the need for government intervention to have kick started the economy in 2010 when the whole world was going aground. The phase that followed gave some very good growth rates regardless whether I agree with the deflater methodology or not. The fact is, the economy grew at or close to 5% per annum for a good six years before we ran into a glitch late last year. What we are experiencing now is tail-end of a slowing process that started in September.
Also, I do not think we must be too concerned with the debt GDP ratio going to 40%. True, we must keep an eye on the IMF-imposed 42% ratio as it will have some major repercussions for our credit ratings if we do not manage to reel in the deficit over the next fiscal year.
But all economies, just like the global economy, work in cycles, and our first encounter with a downturn after a prolonged period of stimulation should not stop us in our track. It is now only a matter of financing the transition period while the economy adjusts from external stimulus to internal productivity.
Now is also the time to start working on a viable exit strategy, for the government to hand back the economy to the private sector, so to speak. This will prevent the government being caught with its pants around its ankles again.
Mark my words, the revival will come sooner than expected. So much has been invested in capacity and increased productivity, that it is only a matter of time before these start showing in overall economic performance.
To support my view I want to quote the minister again.
“To conclude, the external effects on our economy as well as domestic vulnerabilities, especially those emphasized in the external assessments require a timely and concerted response mechanism. Let me take this opportunity to reassure the market and the public that the Government will spare no time to implement the corrective measures in a timely and targeted manner. This is, of course, taking cognizance of the fact that we are a small open economy and we have weathered perfect storms and headwinds in the past.”