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afrol News, 8 October - A new Namibian report questions the fiscal policy of the government since independence in 1991. The steadily increasing debt puts at risks the country's economic development and the maintenance of economic independence, the report indicates. The Windhoek-based Institute for Public Policy Research (IPPR) has released a report - 'Maintaining Economic Independence: Government Debt and Fiscal Sustainability' - that analyses fiscal policy trends from 1992/93 to 2001/02 and raises concern about the government's economic policy. The Namibian government had "maintained a budget deficit every year and as a result public debt has increased." Foreign debt had also increased as new foreign loans have been taken on and the exchange rate has depreciated, the analysis sums up. - Furthermore, it appears that government generally borrows too much because of difficulties in forecasting cash flow, researchers Robin Sherbourne and Tutaleni Nampila say. "Together this has meant that government has failed to meet its own debt target in the very same year it was set," they add. - This damages credibility, they say. The accumulation of debt was raising doubts about whether the government's current fiscal policies were sustainable. Namibia's borrowing from abroad is administered by the National Planning Commission (NPC), which acquires such loans to finance development projects. Foreign loans, however, were received outside the state revenue fund, that is, outside the official government accounting system, the report notes. "Thus, development spending financed through foreign borrowing is not included in budgeted government expenditure and, as a result, is not reflected in the official budget deficit calculations." Reports of the Namibian Auditor General and budget publications for 2002/03 indicate that over the nine year period from 1992/03 to 2000/01 total government debt increased from N$ 1,326 million, or 15.5 percent of GDP, to N$ 5,416 million, or 22.5 percent of GDP. A debt level of 22.5 percent of GDP was "still relatively low by international standards," the IPPR paper says, but "estimates published in this fiscal year's budget documents predicted a sharp increase in public debt for the end of the fiscal year 2001/02." According to the Bank of Namibia, public debt shows a clear upward trend in the stock of central government debt. It is indicated that by the end of March 2002 total government debt stood at N$ 7,504 million, or 27.2 percent of estimated GDP. "As a result, government exceeded its own debt target of 25 percent of GDP by the end of the 2001/02 fiscal year which the Minister of Finance had only announced during his 2001/02 budget speech," the report notes. Unsustainable fiscal policies had caused many countries in the world to run into severe economic problems and to rely on the International Monetary Fund (IMF) or the World Bank for loans to achieve macroeconomic stabilisation or structural adjustment. "These loans are generally conditional on painful economic reforms which are often associated with political upheaval," the IPPR researchers warn. The report presents a "widely-known 'rule of thumb' to the government, which postulates that "governments should cover current expenditure from current revenues and should only resort to borrowing for the financing of capital expenditure." Capital expenditure typically includes development expenditure such as investment in infrastructure. Sources:
Based on IPPR and afrol archives
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