Mid-term budget review fails to achieve fiscal consolidation- IJG Securities
According to financial analysts at IJG Securities, the 2017/18, Mid-Term Budget Review, held on Thursday, failed to achieve the stated objective of fiscal consolidation due to unbudgeted expenditure and additional strategic resource allocations not previously included in the budget.
IJG Securities stated that the lack of controls within ministries as well as between the Ministry of Finance and various other ministries seems to be the root cause of expenditure overruns and the large increase in public debt over the last three years.
The firm added that expenditure seems to be shying away from the theme of fiscal consolidation, having been revised up to N$66.09 billion for 2017/18 from the N$62.54 billion tabled earlier in the year.
“Expenditure increases between 2017/18 and 2019/20 of N$9.5 billion over the mid-term budget tabled last year will be hard to pass off as a consolidation. It is more in line with fiscal stimulus than growth-friendly fiscal consolidation. That said, the goal of fiscal consolidation was always going to be a difficult task given the unbudgeted expenditure and unpaid invoices resulting from this expenditure,” the firm added.
The Minister of Finance, Calle Schlettwein during the Mid-Year Budget review has revised revenue for 2017/18 upward to N$56.72 billion from the previously budgeted N$56.43 billion.
“The budget deficit is thus forecast to be N$9.36 billion, or 5.3% of GDP. This constitutes a severe deterioration in the deficit and equates to a larger than expected increase in government debt, albeit from non-domestic sources,” IJG Securities said.
In conclusion, IJG Securities hopes that the Ministry of Finance will be allowed to start producing budgets that it, and other ministries, can stick to.
“Should better checks and balances be implemented there should be no reason why the ministry would not be able to achieve fiscal consolidation,” IJG added.