Transcript The 2002/03 Budget

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
Target
Public expenditure
Budget deficit
Stock of public debt*
Latest estimate (2004/05)
30%
35.6%
3%
2.4%
25%
33.5%
* Excludes loan guarantees and other contingent liabilities
MTEF framework
MTEF 2001/02
Revenue
Expenditure
Deficit
MTEF 2002/03
Revenue
Expenditure
Deficit
MTEF 2003/04
Revenue
Expenditure
Deficit
MTEF 2004/05
Revenue
Expenditure
Deficit
01/02
02/03
03/04
31.3%
34.9%
3.6%
31.0%
33.9%
2.9%
31.4%
34.3%
2.9%
30.1%
34.5%
4.4%
28.1%
31.1%
3.0%
26.5%
29.0%
2.5%
30.4%
33.4%
3.0%
28.3%
31.6%
3.3%
26.7%
29.7%
3.0%
32.3%
33.8%
1.6%
28.3%
29.6%
1.4%
27.3%
28.3%
1.0%
31.7%
32.9%
1.2%
31.6%
30.4%
(1.2%)
04/05
MTEF 2005/06
Revenue
Expenditure
Deficit
Revenue
Expenditure
Deficit
31.8%
36.0%
4.2%
33.3%
35.9%
2.6%
29.6%
37.1%
7.5%
33.2%
35.6%
2.4%
05/06
06/07
07/08
28.6%
27.7%
(0.8%)
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 (2002/03-2005/06) 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
Chart 1: Defence Affairs and Services
by functional/economic classification as a % of total spending
10%
Start of Namibian
involvement in DRC
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06
Source: Budget documents 1991/92-2005/06
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