PwC Namibia’s take on 2023/24 Budget
With the 2023/24 Budget, government aims to maintain the fiscal stance on a sustainable path, but provision will also be made to create a conducive public policy environment to stimulate economic activity.
Finance minister Iipumbu Shiimi presented the annual budget statement for the 2023/24 financial year in Parliament last Wednesday, with the theme “Economic Revival and Caring for the Poor”.
Shiimi stated that government is further committed to the implementation of identified intervention measures to increase investments by the private sector and add value to the Namibian economy.
However, the current higher interest rates further added to the financial burden of households and corporate budgets alike.
Due to elevated cost of living challenges, policy interventions by government are necessary to aid the vulnerable in society. Simultaneously, policy measures to address growth impediments are required over the medium term.
Economic growth outlook
With a world economy negatively influenced by the global fight against inflation, the resurgence of Covid-19 in China, as well as the effects of the conflict in Ukraine, economic growth is subdued, adding the imposition of higher interest rates to curb inflation by central banks.
Economic recovery, as announced by the International Monetary Fund (IMF), accordingly, is set to decline to 2.2% in 2022 with a slight rise to 2.7% in 2023.
The growth rate for Namibia is projected to 3.2% in 2023, reflecting revised mining production estimates, before slowing further to 2.2% in 2024.
Fiscal policy
The initial revenue outturn stood at N$56.2 billion, reflecting a collection rate of 87.8% over 10 months attributable to mainly value-added tax (VAT), which recorded a 103% collection rate over the period, as well as income tax on individuals. Against this backdrop and with two months remaining in the financial year, total revenue for 2022/23 was revised upwards marginally by N$97 million.
On the positive side, receipts from the customs pool of the Southern African Customs Union (Sacu) amount to N$24.3 billion, around N$6.4 billion higher than the previous estimates.
Operational expenditure of N$66.1 billion is budgeted (which is 10% above the 2022/23 estimates), while the development budget has been increased by 18.7% to N$6.5 billion.
Interest payments of N$10.2 billion have been provided for the 2023/24, which is equivalent to 13.4% of revenues and 4.7% of gross domestic product (GDP).
The budget deficit N$9.1 billion in 2023/24 will be financed through a combination of domestic debt instruments and funding from multilateral organisations.
Increase in social grants
Shiimi stated that the following increases will be implemented:
Effective on 1 April 2023, the old age grant and the disability grant will be increased from the current N$1 300 to N$1 400 per month, while the orphan and vulnerable children grant will be increased from N$250 per month to N$350, the disability grant for beneficiaries under the age of 18 has been increased from N$250 to N$1 400 per month, effective on 1 April 2023, and an amount of N$69.8 million has been set aside to expand the coverage of the orphan and vulnerable children grant through accommodating approximately 30 000 eligible children currently on the waiting list.
Tax proposals
The minister confirmed, as in his medium-term budget review in October last year, no new tax measures are foreseen. The following relief measures were announced: The non-mining company tax rate will be reduced by two percentage points over the remaining years of the medium-term expenditure framework (MTEF). Accordingly, the tax rate will be reduced to 31% effective on 1 April 2024, with a further reduction to 30% on 1 April 2025, tax relief to low-income earners, by increasing the personal income tax exemption from N$50 000 to N$100 000, and the tax arrears relief programme by the Namibia Revenue Agency (NamRA) will continue, whereby interest and penalties will be fully written off if outstanding capital is fully settled by 30 October 2024.
Finance minister Iipumbu Shiimi presented the annual budget statement for the 2023/24 financial year in Parliament last Wednesday, with the theme “Economic Revival and Caring for the Poor”.
Shiimi stated that government is further committed to the implementation of identified intervention measures to increase investments by the private sector and add value to the Namibian economy.
However, the current higher interest rates further added to the financial burden of households and corporate budgets alike.
Due to elevated cost of living challenges, policy interventions by government are necessary to aid the vulnerable in society. Simultaneously, policy measures to address growth impediments are required over the medium term.
Economic growth outlook
With a world economy negatively influenced by the global fight against inflation, the resurgence of Covid-19 in China, as well as the effects of the conflict in Ukraine, economic growth is subdued, adding the imposition of higher interest rates to curb inflation by central banks.
Economic recovery, as announced by the International Monetary Fund (IMF), accordingly, is set to decline to 2.2% in 2022 with a slight rise to 2.7% in 2023.
The growth rate for Namibia is projected to 3.2% in 2023, reflecting revised mining production estimates, before slowing further to 2.2% in 2024.
Fiscal policy
The initial revenue outturn stood at N$56.2 billion, reflecting a collection rate of 87.8% over 10 months attributable to mainly value-added tax (VAT), which recorded a 103% collection rate over the period, as well as income tax on individuals. Against this backdrop and with two months remaining in the financial year, total revenue for 2022/23 was revised upwards marginally by N$97 million.
On the positive side, receipts from the customs pool of the Southern African Customs Union (Sacu) amount to N$24.3 billion, around N$6.4 billion higher than the previous estimates.
Operational expenditure of N$66.1 billion is budgeted (which is 10% above the 2022/23 estimates), while the development budget has been increased by 18.7% to N$6.5 billion.
Interest payments of N$10.2 billion have been provided for the 2023/24, which is equivalent to 13.4% of revenues and 4.7% of gross domestic product (GDP).
The budget deficit N$9.1 billion in 2023/24 will be financed through a combination of domestic debt instruments and funding from multilateral organisations.
Increase in social grants
Shiimi stated that the following increases will be implemented:
Effective on 1 April 2023, the old age grant and the disability grant will be increased from the current N$1 300 to N$1 400 per month, while the orphan and vulnerable children grant will be increased from N$250 per month to N$350, the disability grant for beneficiaries under the age of 18 has been increased from N$250 to N$1 400 per month, effective on 1 April 2023, and an amount of N$69.8 million has been set aside to expand the coverage of the orphan and vulnerable children grant through accommodating approximately 30 000 eligible children currently on the waiting list.
Tax proposals
The minister confirmed, as in his medium-term budget review in October last year, no new tax measures are foreseen. The following relief measures were announced: The non-mining company tax rate will be reduced by two percentage points over the remaining years of the medium-term expenditure framework (MTEF). Accordingly, the tax rate will be reduced to 31% effective on 1 April 2024, with a further reduction to 30% on 1 April 2025, tax relief to low-income earners, by increasing the personal income tax exemption from N$50 000 to N$100 000, and the tax arrears relief programme by the Namibia Revenue Agency (NamRA) will continue, whereby interest and penalties will be fully written off if outstanding capital is fully settled by 30 October 2024.
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