Public debt doubles, but...
“We need to stop the gravy train before it is too late. As you know, Africans like watching things go out of hand, then start fighting instead of taking corrective measures.” That’s how economist refer to the Namibian public debt increase by 50% over the past twelve months, from N$10 billion to about N$20 billion.
The government benchmark on debt is 25% of the country’s Gross Domestic Product (GDP) which is currently about N$90 billion.
“Doubling your debt in such a short period of time is irresponsible, especially when you are spending someone else’s (taxpayer) money. This is worsened by the fact that a big portion of this money will be spent on government infrastructure that does not generate income in the short-run,” says Martina Mwinga, an economist with First Capital.
Economist Robin Sherbourne also cautions: “Although the debt is still just below the benchmark, contingency liabilities could cause debt to spiral out of control. In this case, international investors may view the country as a risk.”
The national debt doubled mainly as a result of an increase in expenditure brought about by the Targeted Intervention Program for Employment and Economic Growth (TIPEEG), a N$15 billion programme aimed at creating 100,000 jobs over three years, but was not initially budgeted for. Other contributing factors were the N$844 million for the increase in civil servants remuneration earlier this year as well as the foreign borrowing of N$5 billion in the form of a EUR500 million Eurobond.
Economist and researcher Klaus Schade is not worried by the debt increase.
“While the international benchmark for national debt is 60% to the GDP, Namibia’s total public debt is still below 20% of the GDP, one of the lowest public debt ratios in the world. We need to ensure that the money is spent wisely and results in the creation of sustainable jobs and in attracting private investment,” says Schade.
Economist Martin Mwinga praised the Finance Ministry for reducing the budget deficit from 7% of the GDP to surpluses of more than 1% and broadening the tax collection base despite the reduction of revenue from SACU. However, he is concerned about government expenditure as well:
“With the release of the unemployment figures at 51% there was panic and overreaction and a massive spending programme (TIPEEG) was introduced that saw a deficit of around 9% and debt to GDP increasing from below 20% to more than 30%,” stresses Mwinga.
In its current form TIPEEG is not seen as genuinely targeting unemployment but rather economic growth in a few priority sectors. Sherbourne reckons that TIPEEG is not growth oriented and therefore cannot create sustainable jobs, describing it as a temporary sticking plaster.
“TIPEEG will just empower a few ‘tenderpreneurs’, unless it is revised to suit the dynamics of the Namibian economy to make an impact on rural production. The money spent now will be a waste that could result in a debt trap just like in other African countries, the USA and Europe,” Mwinga notes.