A presentation by the Institute for Public Policy Research Additional Budget 2003/04 A presentation by the Institute for Public Policy Research 31 October 2003

Anything unusual? Additional budgets normally involve more revenue and more expenditure Not this year! Baptism of fire for new minister Gross reduction in revenue of N$1.2 billion

Revenue Diamond mining tax down from N$1.16 billion to just N$220 million! Other mining tax down from N$150 million to N$20 million! Non-Resident Shareholders Tax down from N$125 million to N$30 million! Total gross reduction of N$1.2 billion!

Revenue Luckily: Personal income tax revised up from N$2.41 billion to N$2.705 billion Non-mining company tax revised up from N$495 million to N$770 million VAT revised up from N$2.365 billion to N$2.550 billion EU and SIDA grants of N$55.9 million

Revenue Leaves net reduction in revenue of “just” N$328 million or 1% of GDP

How did Minister deal with revenue shortfall? Maintained spending at original N$12.2 billion Implemented draconian number of suspensions Increased expenditure on remuneration No subsidies to parastatals

Suspensions Total of N$707 million in suspensions across votes Finance, Police, Health and Agriculture hardest hit (including cherished projects) President, Civic Affairs, Higher Education and Electoral Commission spared Total of N$110 million in statutory suspensions

Deficit Lower revenue (N$328 million less) Lower GDP growth (N$1.6 billion less) Same level of spending (N$12.2 billion) ►deficit estimate rises from 3% to 4% of GDP

Salaries come first! N$303 million in main budget for improvement of remuneration structure Additional N$475 million for remuneration in revised budget Personnel spending 42.5% of total spending

Key issues No real recommitment to fiscal targets introduced by former minister Poor revenue forecasts - especially in company tax Poor shareholder information from Namdeb Inappropriate treatment of diamond and mining revenues Policy of salaries first No mention of debt and government guarantees

Summing up Crisis budget brought about by fall in revenue Little scope for poverty reduction and introduction of BIG (Basic Income Grant) More effort required on revenues