National Budget 2005/06 A presentation by the Institute for Public Policy Research 16 May 2005.

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Presentation transcript:

National Budget 2005/06 A presentation by the Institute for Public Policy Research 16 May 2005

Budget presentation MTEF fiscal framework Revenue Expenditure Recommendations

Fiscal targets TargetLatest estimate (2004/05) Public expenditure30%35.6% Budget deficit3%2.4% Stock of public debt*25%33.5% * Excludes loan guarantees and other contingent liabilities

MTEF framework

Points to note Actual revenues look to be higher than forecast revenues (with the exception of 2003/04) Actual expenditures look to be higher than forecast expenditures Actual budget deficits look to be higher than forecast for 2001/02, lower than forecast for 2002/03, far higher than forecast for 2003/04 and higher for the latest MTEF for 2004/05. The latest four MTEFs (2002/ /06) have all forecast declining revenue, expenditure and deficit but there is no sign that this is taking place. In spite of introducing a spending target of 30% of GDP in November 2001 spending remains at or above 35% of GDP.

Questions Is spending target really 30% of GDP or lower? Will spending really fall by 5% of GDP in next two years? Is reduction in spending due to limited revenues or due to belief in economic benefits? Does MTEF framework boost credibility and reduce uncertainty?

Conclusions MTEF has not presented accurate picture of future revenue and expenditure Spending stuck at 35% of GDP MoF does not achieve targets so why should anyone else? Focus on spending under MoF’s control

Revenue highlights 25% increase in income tax? Non-mining corporate tax doubled in five years? Mining royalty tax? Parastatal dividend policy? Halving of diamond royalties? Contribution of land tax?

Revenue highlights Non-tax revenue down by 25% (tax revenues up by 4%)? Miscellaneous N$121.8 million under Defence? Park entrance fees down by N$3 million? No sale of GRN houses?

Expenditure highlights MTEF vs budget eg. Vote 01 Combatting of crime down Defence up Reduction in primary education and health care Social welfare?

Expenditure highlights – defence spending

Expenditure highlights AALs interest and arrears Ostrich industry subsidies N$50 million to land purchases (only N$3.9 million spent in 2003/04!) N$53 million for Film and Video

Recommendations - revenues Don’t raise tax revenue just because you can Don’t introduce new taxes until existing taxes fully exploited Don’t spring tax surprises on economy Don’t state vague intentions to introduce new taxes Don’t use monopoly parastatals to raise revenue Aim to reduce corporate tax rate and eliminate special tax incentives Focus on non-tax revenues

Recommendations - spending Limit spending on unproductive items Focus spending on productive items Reform must precede more spending on education Increase spending on cash transfers Streamline structures to reduce spending Benefits of achieving spending target