N$3,454,940,947 – more than double what the finance ministry expected was paid in tax in December 2018
Perhaps the time has come for the Ministry of Finance to change its narrative from outright financial crisis to guarded optimism, especially since we will only know by the second week of April what the state of the economy was for the fourth calendar quarter of 2018.
The running monthly balance sheet for December 2018 published by the Bank of Namibia at https://www.bon.com.na/CMSTemplates/Bon/Files/bon.com.na/b4/b424fed4-dd12-4251-9cb7-a906747e402d.pdf, shows a massive jump in government deposits, up almost N$3.5 billion to N$7.2 billion from the November deposits of N$3.7 billion.
Compared to the end of 2017, the emerging picture is even more positive. By the end of November 2017, the government had deposits of just over N$5 billion with the Bank of Namibia, but this actually deteriorated by about N$302 million to slightly more than N$4.7 billion a month later.
To play a bit more with the stats: By the end of December 2018, the ministry has collected N$2.45 billion or roughly 52% more than in December 2017. What the reason is for the December 2017 deposits being less than a month earlier, I do not know, but I can not imagine that any Namibian company was in a position at the end of 2017 to pay tax even a day earlier than the due date.
I assume that other sources of financing, notably the African Development Bank loans may have played a role in the N$5 billion in deposits at the end of November 2017, but I’ll be the first to admit that this is pure speculation. These cards, the Ministry of Finance plays very close to its chest and only the people actually working with the transfers and deposits, know for sure what the source and level of government income in any particular month is.
All I can say for certain is that November is not a tax month for companies and that I doubt that any company tax on profits is hidden in this figure. November was also about N$1.5 billion down on the October figure, sort of confirming my suspicions that some (several) other sources of financing (income) contributed to the relatively large swings in government deposits during 2017.
Judging by the big jump in December 2018 deposits, and keeping in mind that the (very unofficial) estimate was for a tax income of only N$1.5 billion, I further suspect that the Ministry of Finance is currently in a positive cashflow position without having to resort to external financing. Companies only pay tax on profits, and if the tax outperforms, then the logical assumption is that companies are also doing much better.
This I also measure against the published tender schedule for government securities and noted that, unlike 2016’s second semester, it is still very much on track and to the cent in line with what the ministry said it will be borrowing.
The slight exception is the N$195 million less sold in December 2018 but this is subsequently being neutralised over January, February and March by an additional net issuance of N$65 million per month, to catch up on the lesser end-of-year results. Going by the results of all the tenders over the past two weeks, some instruments still oversubscribed by as much as 5.5 times, I see no reason why the finance ministry will not have sold all the debt it intended, come the end of March.
Having seen the December 2018 balance sheet, it now also makes sense why bank liquidity has tanked so precipitously since 07 January this year. I now agree with the opinion that commercial banks’ liquidity was drained to make payments to the government, and that it will gradually percolate back into the economy. This is actually reflected to some extent by the latest figures on bank liquidity.
The last day we had a deficit in local liquidity was on Saturday 12 February with an insignificant amount of N$18.5 million. Overall liquidity was positive as it has been for the whole of February.
This week daily overall liquidity actually exceeded N$3 billion on Wednesday, still a good measure weaker than the highs of September last year, but certainly a good couple a notches above the lows we have had in January this year.
Most important of what has transpired from the past month’s quest to track the vanishing liquidity, is that it is extremely difficult to get reliable up to date statistics, and that there is an almost complete blanket over analytical information. Perhaps, at the same time as switching to a more positive economic narrative, the ministry must realise there are analysts who can provide very valuable insights in the overall economic picture, if only they had unrestricted access to reliable information.
The little bits and pieces we are offered once a quarter by the ministry at one or other official news conference, are not adequate. People who understand the intricacies of government finance want to make up their own minds on how healthy, or sick, the economy is. For instance, we want the monthly VAT figures because they are the most reliable indicator of retail and the health of consumers, but it is like pulling teeth to try and get this information. Theoretically, VAT statistics should be available on the 26th by the mere push of a computer button.
I get the feeling the economy is healthier than the ministry wants us to believe, but they are reluctant to state so openly, possibly because they fear a regression again.