Coen Welsh | Aug 9, 2017 | 0
What do we still need the IMF for?
The final IMF Staff Report on the Article IV Consultations between the IMF and the Ministry of Finance, was released on Tuesday. The final report was completed on 10 January and was followed by the last contact between the IMF staff and the ministry on 29 January, although the release note makes clear, this final meeting happened in absentia, so to speak.
The annual Article IV Consultations are a regular feature on the finance ministry’s calendar. These meetings are not without value. Interventions arising from these consultations helped us weather the first major budget crisis in 1996 when the deficit for the first time exceeded 6% of GDP, during a period when the local capital market was non-existent. These consultations also brought us the so-called rolling budget, introduced in 2003 as the Medium Term Expenditure Framework.
Although the real practical value of these forward-looking three-year expenditure estimates must still be shown, at least they give us a longer horizon for budgeting, and they force us to note the deviation from the estimates in all subsequent actual budget figures. So they have a superficial value in helping our statisticians determine the direction of fiscal trends, but they do not really determine the budget outcome in any particular year.
However, the report remains important if only to let the rest of the world know we are OK, and to underscore the validity of the work done by the staff of the Ministry of Finance. For the rest, it is just a rubber stamp, but it does lift out certain issues which I feel we must address. But again, these issues are known by the ministry, and it is only a common courtesy to thank the IMF for bringing same to our attention again. The issues are not new or novel. We are painfully aware of them as we live with them every day.
Citing our rather good growth record, the IMF nevertheless, is concerned that this economic growth did not “translate into sufficient job creation contributing to persistently high unemployment and income inequality.” Wow! Now that is mind boggling. As a Namibian living in Namibia, I never would have though we have a problem with unemployment and skewed incomes.
The report ventures an opinion on our expected growth for 2013 drawing the considerate conclusion that growth would probably be less than in 2012. I do not want to pour cold water on their eager assumptions, but we shall only know that by July or August, or even later, depending how soon a reliable, adjusted set of National Accounts can be finalised by the Namibia Statistics Agency.
It is a telling aspect of the report that it tells the ministry to cut down on expenditures to ensure that we do not exceed the approved debt limit, but it does so in such a convoluted IMF-speak that I am sure very few officials in the ministry know what they are being told.
“Staff urges the authorities to return to fiscal prudence through greater expenditure control. In case of more adverse shifts in the global economic environment than currently anticipated, staff advocates for allowing the automatic stabilizers to operate on the revenue side.”
I intentionally quote this particular admonition since it is so true, but so hidden in meaningless semantics. I suppose when dealing with African governments, all institutional personnel develop this ability to hide criticism in a spaghetti bowl of vague terms.
Without directly saying so, the IMF report tells us that our so-called counter cyclical budgeting is unsustainable; that we must not exceed the 35% debt to GDP ratio; that we need a clear and communicable exit strategy to rid us of the TIPEEG albatross around our necks; that we must not continually rely on SACU transfers as these can change, and that we must not even consider further taxing an already over-taxed extractive sector.
The one thing that brought joy to my heart was to read that they, just as us, know the civil service is bloated, over-paid and inefficient, and that it constitutes a major drag on development since it devours all available resources in the form of current spending. Fortunately, high-ranking finance ministry officials have said the same thing. This means we know all of it. But neither the IMF report, nor our own ministry’s officials, have so far sketched a clear strategy of how we are going to rid our civil service of incompetent people. In the meantime, we keep on footing the wagebill, and the IMF keeps on holding nice, polite meetings with us.
Perhaps its true value lies in the fact that it puts on record several positive developments that I feel more people must be made aware of, but it also provides a concrete record of those issues we must still resolve. Find the full report at http://www.imf.org/external/pubs/ft/scr/2014/cr1440.pdf