national budget brief - unicef

National Budget Brief

1

NAMIBIA

NATIONAL BUDGET BRIEF2020/21

This budget brief analyzes the 2020/21 National Budget for Namibia. It provides an overall macro-fi scal analysis of Namibia’s current budget, including the size and composition of approved budget allocations to sectors that benefi t children as well as offer insights into the effi ciency, effectiveness and execution of past budgets. The main aim is to put forth recommendations that can inform and make fi nancial decision-making processes better respond to the needs of children and poor households.

Unicef_National Budget Brief 16 November.indd 1Unicef_National Budget Brief 16 November.indd 1 01/12/2020 8:10 AM01/12/2020 8:10 AM

Namibia

2

KEY MESSAGES AND RECOMMENDATIONS1. The COVID 19 pandemic shock to the Namibian

economy further exposed the underlying structural weakness of the economy. This presents an opportunity for the government to rethink its economic model and invest in real economic diversification strategies and structural transformation, including improving national competitiveness and strengthen investments in human capital to improve labour productivity.

2. The government’s gross financing needs have increased beyond what the government can traditionally mobilise. Addressing this revenue shortfall to meet its immediate expenditure demands to respond to COVID 19, the government could consider accessing the available COVID Response Financial Packages, being availed by the IFIs.

3. Whilst domestic revenues remain an important source of budget financing, it has slowed significantly from 35% of GDP in 2014/15 to 29.4% in 2019/20. The medium to long term, requires the government to strengthen revenue collection and administration, including expediting the establishment of the Namibian Revenue Authority, resolving the high tax collection arrears and recalibration of the tax incentive regime.

4. Current spending accounts for an unsustainably high share of the budget, impacting on growth. To achieve higher growth, Namibia would need to rebalance its expenditure mix towards growth enabling capital development, to levels above 20% of its budget, including by implementing public sector reforms aimed at rightsizing the public sector to contain wage expenditure and reforming the State-Owned Enterprises/ assets, that continue to rely on the fiscus.

5. Expenditure containment will be particularly challenging in the short-term, with fiscal deficit and debt levels likely to increase. However, in the medium-term, government would need to continue fiscal adjustment policies to stabilize public debt and balance the adjustment with broader reforms to support sustainable growth.

6. Namibia has made commendable progress in improving budget transparency. However, more could be achieved by creating spaces for effective citizen participation in the budgeting process and strengthening oversight role of both parliament and auditor general.



3

SECTION 1. MACRO AND SOCIOECONOMIC CONTEXT

Macroeconomic trends

1 GDP per capita (constant 2010 US$), World Bank National Accounts data, accessed on 5 September 2020.2 Media Statement, Economic Stimulus and Relief Package: Impact of COVID-19 on the Economy and Households by Hon. Iipumbu Shiimi, MP Minister of Finance

01 April 20203 As at 11 August Namibia had 3406 confi rmed cases, 832 recoveries and 2552 active cases

The Budget was presented against the unprecedented effects of the COVID 19 pandemic, making it diffi cult to come-up with long term forecasts. Rightly so, the Ministry of Finance presented a one-year budget, a complete depar-ture from previous years, wherein the budget is presented with a 2 year forecast.

Namibia’s economic growth, like the rest of the world, is expected to contract in 2020, as a result of the dis-ruptions to economic activity caused by the COVID-19 pandemic. Whereas the country had recorded impressive growth, averaging 5.6% between 2011-2015, the past 4 years have been particularly challenging for the economy. The COVID 19 pandemic came in at time when the econo-my was at its weakest and unable to respond to any shock. In that regard, the 2020/21 Budget project the economy to record its deepest recession since independence in 1990 of 6.9%, with a worse case contraction of 9.8%, on account of the disruptions to economic activity due to COVID 19, (Fig 1).

COVID-19 has affected economic activities through both demand and supply-side shocks in Namibia. On the de-mand side, the containment efforts and the consequent policy actions, such as physical distancing and lockdowns, have led to a decline in demand for Namibia’s commodities both internally and externally. This has been exacerbated by a sharp decline in global economic activities, including the decline in global commodity prices, hurting Namibia, given its high degree of economic dependence on mineral exports and tourism. On the supply side, as the labour force remains at home to combat the spread of the virus, domestic eco-nomic activities have also declined, with the Budget project-ing a massive contraction in primary industries by 12.1% in 2020, whilst the secondary and tertiary industries are pro-jected to contract by 2.6% and 5.7%.

The deep contraction on the back of prolonged econom-ic recession, will negatively impact on social outcomes. Per Capita GDP growth has slowed down from 3.9% (2013-15) to -2.1% over the last 3years. Thus per capita GDP has fallen from US$6,272 in 2015 to US$5,766 in 20191 and is ex-pected to further decline in 2020. Evidence suggests that a 1% decrease in per capita GDP increases poverty by ~1.7% and infant mortality rate by up to 0.4%. Whilst the economy is expected to rebound in 2021, it is clear that the projected growth outlook is not only below the Fifth National Develop-ment Plan (NDP 5) annual growth target of 4.6% but also not suffi cient to achieve the country’s SDGs targets.

Fiscal response to COVID 19 pandemic

Like many other economies, Namibia implemented an economic stimulus package to alleviate the socio-eco-nomic impacts the coronavirus pandemic. Part of the package included N$1.1 billion to the Ministry of Health and Social Services for measures to tackle the coronavirus, N$562 million for emergency income grant of N$750 per person (one-off payment) to those who lost their jobs in the formal or informal sectors during the fi rst period of lockdown in March 2020; wage and employment subsidies amounting to N$359 million and stimulus packages to support key sec-tors of the economy.2 According to the Economic Associa-tion of Namibia, the total package amounting to N$8.1billion is only about half of the total of about N$16 billion which is the estimated cost of supporting Namibia’s private sector and households though the pandemic.

With the signifi cant rise in cases3, the socio-economic impacts of the COVID 19 pandemic could worsen growth projections and increase risks and vulnerabilities among households and children. The economic impacts of the pandemic will extend far beyond those infected by the vi-rus. Families that rely on income from the informal sector, seasonal jobs, cross-border trade as well as small business-es, are likely to be hardest hit by measures to contain the spread of the virus, especially restrictions on movement and business (lockdown). This will likely erode the recent pov-erty reduction gains and progress towards social inclusion. The UN System in Namibia is supporting the government in undertaking a detailed socio-economic impacts assessment to generate evidence and inform appropriate fi scal response to protect people, strengthen health systems & health re-sponse, protection jobs and SMEs as well as supporting eco-nomic recovery and growth.

Fig 1: Namibia’s Real GDP Growth Trends and Projections

5.1 5.1 5.6 6.4 6.1

-0.3 -0.3 0.7-1.1

-6.6

-1.1

3.62.2

5.1 5.1 5.6 6.4 6.1

-0.3 -0.3 0.7-1.1

-9.8

-1.5

2.7 2.3

5.1 5.1 5.6 6.4 6.1

-0.3 -0.3 0.7-1.1

0.8 1.2

4

-12.0-10.0-8.0-6.0-4.0-2.0

0.0

2.0

4.0

6.0

8.0

Perc

ent

Fig1:Namibia's RealGDPGrowth TrendsandProjections

GDPGrowth WorstCase PriortoCOVID

Source: Various National Budget statements, Own calculations


Namibia

4

Infl ation developments

Namibia’s infl ation remains somewhat low, with more of the same being projected in the near term. Having peaked at 6.7% in 2016, overall infl ation is expected to average 2.8% in 2020, mainly refl ecting low increases in food and utility prices. However, high Education infl ation remains a poten-tial risk to access in Namibia. Year on Year (YoY) education infl ation outstripped overall infl ation since 2014 meaning that the costs of education materials and services were increas-ing at a much higher rate averaging 11.9% in 2019 compared to 3.7% for overall infl ation, (Fig 2). The major driver of the high cost of education has been due to price increases from pre-and primary education materials and fees. This can be a major deterrent to access at pre-primary education, as par-ents will be required to fork out more to support early learn-ing of their children, which most vulnerable families may not be able to afford. The government could consider expand-ing universal education funding through from pre-primary to cushion learners and household from the impact of infl ation and achieve high attainments rates across all levels of basic education.

4 https://data.worldbank.org/indicator/SI.DST.FRST.20?locations=NA&view=chart, accessed on 5 September 2020.

Social development progress

Inequality remains a big development challenge in Na-mibia, with the country ranking the third most unequal society in the world. Whilst progress has been made in-cluding through sustained investments in social protection, education and health, more still needs to be done to reduce the gap between the haves and have not. With a Gini coeffi -cient of 0.56 in 2015/16, albeit a marginal decline from 0.58 in 2009/10, 20% of the richest still control 63.7% of the Gross National Income (GNI) whilst the poorest 20% only account for 2.8% of the GNI4. In addition to inequalities, the majority of the population, including children, face extreme vulnera-bilities due to a combination of food insecurities induced by droughts and unemployment, resulting in weak social out-comes. Table 1 summaries Namibia’s key social indicators.

The high inequality tends to weigh down the country’s Human Development Index (HDI). Namibia’s HDI value for 2018 is 0.645 putting the country in the medium human de-velopment category, positioning it at 130 out of 189 countries and territories. Between 1990 and 2018, Namibia’s HDI val-ue increased from 0.579 to 0.645, mainly driven by improve-ments in GNI per capita and life expectancy. However, when the country’s 0.645 HDI value is discounted for inequality, the HDI falls to 0.417, representing a 35.3% loss due to inequal-ity, which is: 0.9 percentage point higher than the South Af-rica’s loss of 34.4%; and 9.4 percentage points higher than the average loss due to inequality for medium HDI countries of 25.9% and for Sub-Saharan Africa, of 30.5%. Inequalities in human development hurt societies and economies, waste-fully preventing people, including children from reaching their full potential at work and in life. In that regard, inequalities in human development remain a defi ning bottleneck in achieving Namibia’s SDGs and national development priorities.

Fig 2: Trends in Annual Infl ation

0

2

4

6

8

10

12

14

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Perc

ent

Fig 2: Trends in Annual Inflation

Food Education Overall Health

Source: NSA Infl ation Monthly Updates, Own calculations



5

Table 4. Select social development indicators, 2018 (or latest available)

Indicator Value Source

Population 2,324,388 NSA

Child population 999,486 NSA

Poverty headcount ratio at national poverty lines (% of population) 17.5 NSA

Gini Index 0.56 NSA

Human Development Index 0.645 HDR

Child monetary poverty 21 IMF

Life expectancy at birth, female/male (in years) 66.2 WDI

Infant mortality rate (per 1,000 live births) 29.0 WDI

Under five Mortality rates (per 1,000 live births) 39.6 WDI

Prevalence of stunting, height for age (% of children under 5) 22.7 WDI

Prevalence of wasting, weight for height (% of children under 5) 9.0 WDI

Net enrollment rate, primary (% of primary school age children) 99.0 EMIS

Net enrollment rate, secondary (% of secondary school age children) 54.2 EMIS

Literacy rate, adult total (% of people ages 15 and above) 89 NSA

Households with safe drinking water (% of total households) 94 NSA

People practicing open defecation (% of population) 49.2 WDI

Prevalence of HIV, total (% of population ages 15-49) 11.8 WDI

Source: World Development Indicators, IMF, HDR, EMIS, NSA – latest available

KEY TAKEAWAYS

• On account of the COVID 19 pandemic, the Namibian economy is projected to contract by between 6.9% to 9.8% in 2020. With the support of the UN, Namibia is undertaking a detailed socio-economic impact assessment of COVID 19 to inform appropriate policy response.

• Whilst social progress has been made, inequality remains a big development challenge in Namibia, with the country ranking the third most unequal society in the world, hence equitable fiscal policy remains an important tool in facilitating greater social inclusion.

• High education inflation is a potential risk to accessing quality education in Namibia, particularly by children from vulnerable households and regions, hence the need to ensure adequacy of coverage of the universal education funding through from pre-primary.


Namibia

6

SECTION 2. AGGREGATE SPENDING TRENDS AND PRIORITIES

5 A separate Education Budget Brief has been prepared to assess the extent to which the allocation addresses the education needs of children

Spending priorities

In line with the government’s policy thrust to support social development, the Ministries of Education and Health gets the largest shares of the total budget. This is particularly so given the increased gross fi nancing needs to strengthen health systems and improving the learning en-vironment for face-to-face learning following school closure to mitigate the impacts of COVID 19. The Education Sector5

was allocated 22% of the total non-interest budget, (Fig 3). The challenge for the government, is therefore, to ensure that this investment in social sectors is protected and effi -ciently utilized for impact.

Overall fi scal framework

Whereas the country has been implementing fi scal consolidation policies following the expansionary fi s-cal policy stance between 2010 and 2015, the COVID-19 pandemic has upended this by further increasing expen-diture demands. The decline in revenues and the concur-rent increase in government expenditure to mitigate the eco-nomic effects of the COVID-19 pandemic will result in fi scal pressures in the short- to medium term in the economy. This will see a worsening of the fi scal defi cit from 4.5% of GDP in 2019/20 to a projected 12.5% in 2020/21, (Fig 4a & b).

In order to close the fi nancing gap, the government will have to resorted to debt fi nancing, as seen in the recent past. This will see total debt stock rising to an estimated 69.6% of GDP, (Fig 5), almost double the country’s debt management threshold of 35%. A signifi cant share of the total government debt is from domestic borrowing, which is not only costly, but has a potential crowding out-effect on pri-vate sector borrowing, undermining the role of private sector in driving economic growth. Overtime, there would be need to recalibrate the country’s debt structure.

Fig 3: Top 10 Ranked Ministries by Total Budget

22.0

12.49.7 9.7 8.4 8.2

5.1 3.7 2.7 2.2 2.10

5

10

15

20

25

02468

10121416

Percen

tofTotalBud

get

N$Billio

ns

Fig3:Top10RankedMinistries byTotalBudget

TotalAllocation %ofTotal

Source: 2020/21 National Budget Statements, Own calculations

Fig 4a: Trends in the Fiscal Outturn

49,931

52,215

50,865

58,659

55,882

58,596

51,397

58,704

64,638

62,228

67,523

65,108

66,550

72,772

-40,000

-20,000

0

20,000

40,000

60,000

80,000

N$Millions

Fig5a:TrendsintheFiscalOutturn

Revenue Expenditure OveralBalance

Fig 4b: Trends in total annual fi scal defi cit

-25,000

-20,000

-15,000

-10,000

-5,000

0

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

Fisc

ald

efic

it(N

$M

illio

ns)

Fisc

ald

efic

itas

%o

fGDP

Fig5b:Trendsintotal annual fiscaldeficit

Overalfiscalbalance(RHS) Fiscalbalance(%ofGDP)(LHS)

Source: Various National Budget Statements, Own calculations



7

Rising debt levels have seen a sharp increase in debt servicing obligations. Since 2017, debt servicing surpassed 3% of GDP6, crowding-out social and economic investment. Furthermore, interest payments now make a signifi cant pro-portion of revenue collected by the government. In 2020, an amount of N$8.4 billion, or 16.4% of revenues is earmarked for interest payments, which is 5% higher than the total bud-get for the Ministry of Health and Social Services.

6 Namibia Development Finance Assessment Report 2019

Notwithstanding the rising debt levels, 2020 remains an unprecedent year requiring massive fi nancing be-yond what the government can traditionally mobilise. Expenditure demands to protect people including children, strengthening health systems & health response, protecting SMEs & jobs, implementing fi scal stimulus to contain the recession and support swift economic recovery and growth, is a particularly important consideration for the government. In that regard, the government is urged to seek support from the various COVID Response Financial Packages made avail-able by the various International Financial Institutions (IFIs), which are largely concessionary and highly fl exible. What will be important is to ensure accountability, transparency and effi cient use of the resources to generate the desired returns for future repayments. Over time, the government would need to continue its fi scal consolidation efforts to sta-bilize public debt and balance the adjustment with broader reforms to support economic growth.

TAKEAWAYS

• The government’s gross fi nancing needs have increased beyond what the government can traditionally mobilise, thus the need for government to consider accessing the available COVID Response Financial Packages, being availed by the IFIs.

Fig 5: Namibia’s Total Debt Profi le

25.5%29.5%

42.9% 43.4%49.1%

54.8%

69.6%

0%

10%

20%

30%

40%

50%

60%

70%

2014/15 2015/16 2016/17 2017/18 2018/19 2019/20Est 2020/21Proj

Fig6:Namibia's TotalDebtProfile

Domestic External Total



Namibia

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SECTION 3. SPENDING COMPOSITION

7 NHIES (2015/15) notes that between 2010 and 2015, Poverty has declined from 28.8% to 17.4% whilst inequalities declined from 0.58 to 0.56

Aggregate spending trends

Nominal Government spending has been increasing over recent past. Total expenditures for 2020/21 are projected to signifi cantly increase as a result of higher gross fi nancing needs to better respond to COVID 19 pandemic. In 2020/21, total government expenditures are projected at N$72.8 bil-lion, a nominal increase of 9.3% from the estimated N$66.6 billion expenditure in 2019/20. In real terms, government ex-penditures have however decreased by 4.4% from N$58.7 billion in 2014/15 to the projected N$56.1 billion, (Fig 6).

Composition of spending by sectors

Namibia invests a signifi cant share of its budget in social sectors. This has contributed to both equality and poverty reduction over the years7. The social sectors are allocated 49.5%, some 2.1percentage points higher than the estimat-ed spending in 2019/20, (Fig 7), to meet the increased ex-penditure demands for supporting continued learning, sus-taining the social protection programs, strengthening health systems and health response to the COVID 19 pandemic. In addition, much of the increase in the 2020/21 budget will, rightly so, go to economic sectors with an allocation of N$11.4 billion, accounting for 17.7% of the total budget. This allocation will cater for the economic stimulus package, and the Emergency Income Grant.

Composition of spending by economic classifi cation

Wage expenditure typically is the largest cost driv-er within the government budget. Of the N$64.3 billion non-interest expenditure target, employment costs are ex-pected to account for 45%, subsidies and other transfers are expected to increase by 12 percentage points, in response to COVID 19 related expenditures, bringing the total share of current expenditures to 90% of the total budget (Fig 8). Despite declining from 55% in 2018/19, Namibia’s expendi-ture on employment costs remain relatively higher that the average Middle-Income Countries, (Fig 9)

The high current spending inevitably leaves a relatively small share of the budget toward capital investments. Spending in growth-enhancing capital investments has fall-en from an average of 17% between 2014/15 to 2017/18, - high growth periods, to a low of 10% over the past 3 years. Hence, sustaining the growth momentum, Namibia would need to double up its capital spending to levels of 20% of its budget, in line with other middle-income countries, (Fig 9). This could be achieved through further public sector reforms aimed at rightsizing the public sector to contain wage expen-diture and reforming the State-Owned Enterprises/ assets, that continue to rely on the fi scus.

Fig 6: Trends in Agrregate Spending

-10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2014/15 2015/16 2016/17 2017/18 2018/19 2019/20Est2020/21Proj

N$Millions

Fig7:TrendsinAgrregateSpending

Nominalexpenditure Realexpenditure


Fig 7: Sectoral Composition of Total Expenditures

37.6%48.0% 34.2%

48.8% 47.4%49.5%

21.7%21.9%

12.2%24.5% 24.5%

20.4%19.7%13.9%

26.8%

11.2% 11.3%

17.7%12.0% 8.3%2.1%

8.0% 9.0%

6.9%8.9% 7.9%17.4%

7.5% 7.7%

5.5%

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2015/16 2016/17 2017/18 2018/19 2019/20Est 2020/21Proj

N$

Mill

ions

Fig 8: Sectoral Composition of Total Expenditures

Social Sector Public Sector Economic SectorAdministrative Sector Infrastructure Sector


Fig 8: Trends in the Composition of Expenditures

35% 36% 34% 34%55% 53% 45%

14%14%

14% 12%

12% 13% 14%27%

25%26% 27%

21% 19%31%

4%3%

2%2% 3% 4%

0%

16%17%

18%17% 9% 10.4%

10.0%

2014/15 2015/16 2016/17 2017/18 2018/19 2019/20Est 2020/21Proj

Fig 9: Trends in the Composition of Expenditures

Employment Costs Goods and servicesSubsidies & other transfers Other CurrentCapital

N$

Mill

ions

60,000

50,000

40,000

30,000

20,000

10,000

-

70,000


Fig 9: Namibia’s Composition of Spending in relations to MICs

Source: WEO,GFS and IMF Staff Calculation (2019)



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SECTION 4. BUDGET EXECUTION AND TRANSPARENCY

Budget execution

Overall budget execution remains high in Namibia. The variance between the approved budget and the actual out-turn has remained within the international standards under the Public Expenditure and Financial Accountability (PEFA) framework which provides for ±5% variance for a credible budget. Overall expenditure underperformance was experi-enced between 2015 – 2017, averaging -2%, whilst expen-diture overruns were experienced from 2017 – 2019 at an annual average of 3%.

This notwithstanding, budget credibility is a major pub-lic fi nance concern with regards to the development budget. On average, the development budget has been under-implemented by 20%, (Fig 10a). This is partly due to expenditure overruns in the current budget (employment costs, goods and services and interest payments) thereby crowing-out development spending. Economic sectors have

experienced the least development budget execution rates, with only 10% of the approved budget having been imple-mented in 2019/20 fi nancial year, (Fig 10b). Development budget for social sectors averaged 23% lower than approved over the period 2015- 2020, with education and health sector development budget execution averaging 30% and 35% be-low approved budgets, respectively. Further analysis would be required to determine the underlying bottlenecks causing low development budget execution, to help the government achieve improved budgetary outcomes.

TAKEAWAYS• Namibia invests a signifi cant share of its budget in social sectors. This is commendable and needs to be sustained

over time as a key policy strategy to reduce poverty and inequalities.

• Current spending accounts for an unsustainably high share of the budget, impacting on growth. To achieve higher growth, Namibia would need to rebalance its expenditure mix towards growth enabling capital development, to levels above 20% of its budget, in line with other middle-income countries.

Fig 10a: Trends in Overall Budget Executi on

2%

-6%

-32%

0%7%

1%

-12%

-21%

4%9% 9%

-12%

-2%

20%

4%

-36%

16%

-2%

0%

-28%

Employment Costs Goods and services Interest payments DevelopmentPerc

ent

Dev

iatio

n fr

om A

lloca

tion

F i g 11a: Trends in Overall B udget Execu tion

2015/16 2016/17 2017/18 2018/19 2019/20

Fig 10b: Development Budget Executi on by Sectors

-36%-26%

-2%-15% -9%

-46%

-12%

-47%

-10%-28%

-14%-4%

-54%

77%

-19%

-42%

-4%

-78%-68%

-40%-36%

-12%

-90%

-29% -25%

Social Sector Public Sector Economic Sector AdministrativeSector

InfrastructureSectorPe

rcen

tage

Dev

iatio

nfr

omA

lloca

tion

F i g 11b: Development Budget E xecution by S ectors

2015/16 2016/17 2017/18 2018/19 2019/20



Namibia

10

Budget transparency

Namibia has made signifi cant strides in enhancing bud-get transparency, although more still needs to be done. The country’s score on the Open Budget Index8 increased marginally from 50 (out of 100) in 2017 to 51 in the 2019 Survey, some 6 percentage points higher than the global av-erage of 45 (out of 100). This notwithstanding, the country’s score 10 percentage points lower than the 61% threshold for countries considered transparent – providing suffi cient budget information for public scrutiny. With a score of 51, the country ranks 47 out of 117 countries. Within the East and Southern Africa region, Namibia Ranks 2nd after South Africa (with a score of 87 out of 100), (Fig 11).

Whilst the country performs fairly well on transparency with a score above the global average, citizen participa-tion in the budgeting process remains low. The country, therefore, needs to pilot several citizens participation mech-

8 The Open Budget Index is developed from the Open Budget Survey (OBS) conducted by the International Budget Partnership (IBP) and is the world’s only indepen-dent, comparative and fact-based research instrument that uses internationally accepted criteria to assess countries on 3 pillars of: Budget transparency, Citizens Participation in the Budgeting Process and Budget Oversight.

anism to improve its score from the zero percent achieved in the 2019 Survey. Such mechanism would need to be led by both the Ministry of Finance and Parliament and could include regional budget consultations with key stakeholder and the general public, as well as public hearings on budget formulation and execution. Key would be the need to ensure that reports of such meetings are produced and shared on-line, whilst feedback mechanisms are piloted.

Equally, additional measures are needed to improve bud-get oversight by both Parliament and the Auditor Gener-al. The 2019 Survey results show that the Legislature and Auditor General in Namibia, together, provide limited over-sight during the budget process, with a composite oversight score of 46 (out of 100). Taken individually, Parliamentary oversight was ranked at 31 out of 100, whilst audit oversight was ranked 78 out of 100, indicating signifi cant scope for improvements.

TAKEAWAYS

• Overall budget execution remains high in Namibia, albeit low execution of the development budget. Further analysis would be required to determine the underlying bottlenecks causing low development budget execution to inform requisite reforms.

• Namibia has made commendable progress in improving budget transparency. However, more could be achieved by creating spaces for effective citizen participation in the budgeting process and strengthening oversight role of both parliament and auditor general.

Fig 11: Namibia’s Performance and Ranking on the OBI

Source: IBP Open Budget Survey Report 2019



11

SECTION 5. FINANCING THE NATIONAL BUDGET

Revenue trends

The projected economic contraction is inevitably expect-ed to negatively impact on government revenues. Total revenues for 2020/21 are projected at N$51.4 billion, some 30.0% of GDP. In nominal terms, this is 14.3% below the indicative Medium-Term Expenditure Framework (MTEF) es-timates for 2020/21 and 12.3% lower than the 2019/20 esti-mated outturn of N$58.6 billion. In real terms, government revenues, having peaked at N$50.8 billion in 2017/18, have been on a declining trend and projected at 14.8% lower than the previous fi nancial year at N$39.6 billion, (Figure 12).

Composition of revenues

Southern African Customs Union (SACU) receipts re-mains the single biggest source of government revenue. SACU receipts have contributed on average, 32% of total government revenues, with Income Tax on Individual and VAT, contributing a combined average of 44% of revenues over the period 2014 -2019. However, due to the negative economic effects of COVID-19, all the domestic revenues are expected to decline signifi cantly in 2020 including: a 32.8% decline in VAT collections, a decline of 20.3% in in-dividual income tax on account of wage reductions and job layoffs across various sectors of the economy, a 25.5% fall in corporate income tax; and a 41.2% contraction in non-tax

revenues, (Fig 13). Efforts would thus be needed to strength-en revenue collection and administration, including dealing with the high tax collection arrears, averaging 67.9% uncol-lected tax arrears.

However, on a positive note, SACU revenue, which are determined at the start of the year, have provided a ma-jor lifeline. SACU receipts estimated at N$22.3 billion, ~ 43.8% of total Revenues have been received for 2020. How-ever, this revenue stream is expected to be signifi cantly sub-dued in 2021, given the projected recessionary conditions in all the SACU countries, hence the revenue near-term outlook is somewhat weak, and dependent on the speed and pace of the overall economic recovery.

Whilst domestic revenues remain an important source of budget fi nancing, it has been declining over time. Even before the COVID pandemic, revenue growth has slowed signifi cantly from 35% of GDP to 29.4% in 2019/20, (Fig 14),

Fig 12: Total Government Revenue Trends

0

10

20

30

40

50

60

N$

Bill

ions

Fig 13: Total Government Revenue Trends

Nominal Revenue Real Revenue


Fig 13: Trends in Revenue Composition

36% 33% 28%33% 31% 32% 43%

21% 23%25%

21%21% 20%

19%

20% 21%24%

23%24% 23% 19%

14%15% 15%

13%13% 12%

9%2%

2% 3%

3%4% 5%

4%3.13.1 3.3

4.03.6

4.3

2.5

0

10

20

30

40

50

60

2014/15 2015/16 2016/17 2017/18 2018/19 2019/20Est 2020/21Proj

N$

Bill

ions

Fig 14: Trends in Revenue Composition

SACU VAT Income Tax on Individuals

Company Taxes Other Tax Revenues Non-Tax Revenues


Fig 14: Sources of budget fi nancing as share of GDP

35.1 34.331.0 32.0

28.8 29.4 30.0

3.0 3.13.0

4.94.7 4.7 5.6

0.9 0.90.9

1.10.9 0.9

0.9

1.4 1.11.6

1.4

1.1 1.1 0.0

2014/15 2015/16 2016/17 2017/18 2018/19 2019/20EST2020/21PROJ

Percen

tofG

DP

Fig15:Sourcesofbudget financing asshareofGDP

DomesticRevenues ForeignDebt DomesticDebt ODA



Namibia

12

and the outlook remains weak. This is impacting negatively on the government’s ability to sustainably invest in socio-eco-nomic progress. Hence, the need to strengthen revenue col-lection and administration including fast tracking the creation of the Namibian Revenue Authority, resolving the high tax collection arrears and recalibration of the incentive regime.

To augment domestic revenues, the government has in-creased its annual debt uptake. Annual foreign guarantee issuance rose from 3% of GDP in 2014/15 to a projected 5.6% in 2020/21, whilst annual domestic borrowings and Of-fi cial Development Assistance (ODA) infl ows have averaged 1% of GDP, (Fig 14).

Foreign aid fl ows

Offi cial Development Assistance has historically been an important source of fi nancing for economic and social development and infrastructure expenditure. However, ODA assistance has been on a downward trajectory - consis-tent with the experience of other countries as they approach and attain upper-middle-income status. ODA including grants, loans and technical assistance has declined from US$331.1 million in 2009 to a projected US$148.9 million in 2019, (Fig 15). Consequently, ODA per capital has signifi cantly fallen from US$155 in 2009 to a projected US$62 in 2019. Most of these aid fl ows have remain off budget and strategies are needed to ensure transparency and allocative effi ciencies in the use of such fl ows.

TAKEAWAYS

• Whilst domestic revenues remain an important source of budget fi nancing, it has slowed signifi cantly from 35% of GDP in 2014/15 to 29.4% in 2019/20, thus the need to strengthen revenue collection and administration.

• Consistent with the experience of other upper-middle-income countries, ODA infl ows have contracted signifi cantly. However, there is still need to ensure that these fl ows are accounted for in the budget for transparency and to improve allocative effi ciency.

Fig 15: Trends in ODA infl ows (per Capita and USD Millions)

0

20

40

60

80

100

120

140

160

180

-

50

100

150

200

250

300

350

Per

capi

ta

US$

Mill

ions

Fig 16: Trends in ODA inflows (per Capita and USD Millions)

Total received (left axis) Per capita value (right axis)



national budget brief - unicef

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