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The Budget and the impact of COVID 19

PUBLISHED 28 MAY 2020   

The magnitude of the Covid 19 pandemic has crushed the economy and will leave the country with an overall budget deficit of almost N$ 21.4 billion this year.

Add to that the more than N$4.8 billion of debt to be repaid in 2020-'21, and the country has to go look for around N$ 26.2-billion to make its 2020-'21 books balance.

A budget deficit that is about 120% greater than that of 2019-20, and about 352% more debt to be repaid, left Finance Minister Iipumbu Shiimi with no choice but to cut the government's total debt to almost N$ 117, 5 billion. Compared to last year, this is an increase of about N$ 17 billion.

Total debt now amounts to about 68.5% of gross domestic product (GDP), almost double the government's ceiling for it.

Shiimi's total operating and development budget for 2020-21 provides for spending of nearly N$ 72.8 billion - about N$ 4.8 billion or 7% more than the previous financial year.

By contrast, total revenues of almost N$ 51.4 billion will fall by almost 11.7% compared to last year.

"The magnitude of the COVID-19 pandemic has devastated the economic landscape and wiped out most of the benefits achieved with budget-based reforms," Shiimi said on Thursday when he tabled his debut budget in parliament.

Public servants

The ongoing recession, the curtailment and the impact of COVIF-19 will have a deep impact on people and businesses this year.

This is expected from the nearly N$ 15.4 billion tax on personal income, corporate profits and capital gains. This is almost 31% less than last year.

While Namibians have either lost their jobs or are earning smaller salaries, civil servants are likely to get rid of them.

In his budget speech, Shiimi did not say a word about retrenchments or salary cuts. Taxpayers will have to shell out nearly N$ 28.8 billion for officials' total remuneration packages in 2020 - '21, barely 3.5% less than last year.

In 2019-'20, the public service's salary roll accounted for 51% of the government's total revenue. Now that figure stands at 56%.

Loans and interest

Just over N$ 9 billion in cash reserves are available to help narrow the budget deficit.

The government intends to borrow about N$ 10.3 billion locally, somewhat less than last year.

In total, almost N$ 6.8 billion will be borrowed abroad, an increase of more than 2,500% compared to last year when only N$ 257 million of loans were not local.

Two of these loans are from the Africa Development Bank and both have to be repaid in rand. One is N$ 2 billion and the other about N$ 1.5 billion.


About N$ 3.2 billion will be borrowed overseas to mitigate the impact of COVID-19. The budget does not state where and in what currency the money will be obtained.


The government will have to pay about N$ 7.7 billion in interest on debt this year, about 20% more than last year. Interest and cost of servicing debt is going to take a bite of 16.4% from revenue, far greater than the government's benchmark of 10%.

Unlike previous years when the budget was submitted as part of a three-year spending framework, Shiimi just tabled a budget for 2020-21. This reflects the urgency of the one-off higher needs that must come from the pandemic and must be met, he said.

Given the "challenging economic landscape, now is not the time to impose new taxes", the minister also said.