Staff Writer
Finance minister Iipumbi Shiimi on Wednesday announced a N$64.3 billion budget, where he projected the domestic economy to contract by 6.6 percent in real terms this year.
“The 2020/21 Appropriation Bill amounts to N$64.3 billion. A total of N$8.4 billion, or 16.4 percent of revenue, is earmarked for the payment of interest payable on moneys borrowed. This amount is deemed to have been appropriated. Therefore, the total expenditure, including interest payments, for the 2020/21 financial year, amounts to N$72.8 billion,” he said.
“The contraction may as well linger on in 2021 at a moderate rate of 1.1 percent, with the new normal average growth rates of between 2.0 and 3.6 percent in 2022 and beyond.”
Shiimi said exports are projected to decline by about 11.9 percent year-on-year, compared to an estimated decline of 1.1 percent in 2019.
“Imports are expected to decline by 14.9 percent in 2020, much faster than the fall in exports, reflecting the slowdown in investment and final consumption of goods and services,” the Finance minister said.
Shiimi said all major sectors of industry in the country are projected to post negative growth rates this year, a position he attributed to production disruptions and external and internal demand side fallouts.
“The primary industry is projected to contract by 12.1 percent, reflecting demand side induced shocks, especially for mining outputs. The secondary industry would contract by an estimated 2.6 percent, mainly as a result of deeper contractions in the construction subsector and manufacturing activity in the beverage and mineral beneficiation subsectors, and the decline in the tertiary industry is estimated at 5.7 percent for 2020, principally as a result of the direct effects of travel and social distancing restrictions on tourism, hotels and restaurants, transport and wholesale and retail trade subsectors,” he said.
The Finance minister said revenue for FY2020/21 will decline by 14.3 percent (N$8.3 billion) at N$51.4 billion reflective of the negative impact of COVID-19.
“The projected impact of COVID-19 on the economy and the large downward adjustments in nominal GDP have a significant negative effect on revenue and fiscal indicators for FY2020/21 and over the medium term,” he said.
Shiimi said COVID-19 will have a negative impact on corporate tax, value added tax collections and individual income tax.
“Supply side and production disruptions would lead to a decline of about 20.3 percent in individual income tax on account of wage reductions and job layoffs across various sectors of the economy, corporate income tax is estimated to fall by about 25.5 percent,” he said.
The government debt stock is estimated to rise to N$117.5 billion in FY2020/21, amounting to 68.7 percent of GDP from 54.8 percent in FY2019/20.
