NAMIBIA’S continued dependence on imports has put pressure on the country’s foreign reserves causing a N$1,8 billion balance of payment deficit for the 2014/15 financial year.
Presenting the 2015/16 national budget yesterday in parliament, finance minister Calle Schlettwein said the deficit was caused by strong inflows of imports over exports.
This, he explained, further put pressure on the stock of foreign reserves, although they remain sufficient to support the currency peg. He also said the deficit comes after the country enjoyed a surplus of N$598 million in 2013/14.

In the monetary policy for January that was presented on 18 February this year, the Bank of Namibia said the country’s reserve stocks had declined on a yearly basis by 13,7% to N$16 billion.

“This was mainly due to the high import bill. Despite this pressure, the international reserves remain adequate to maintain the one-to-one link of the Namibian dollar to the rand,” the statement said.
Schlettwein said Namibia should optimise trading opportunities by improving significantly on her productive capacity and avoid the trap of becoming a captive market for those countries with an ability to trade in finished goods.

He also said Namibia believes in the relevance of the Southern African Customs Union (SACU) as an engine for regional integration and industrialisation.
About 30% of Namibia’s budget is funded through SACU earnings, with the country raking in N$7,9 billion during 2011/12; about N$12 billion during 2013/14, while for 2014/15, the earnings were estimated to be N$18,12 billion.

The SACU revenue sharing formula (RSF) has been revised substantively twice, once in 1969 and in 1994-2002 since the creation of the customs union in 1910.

South Africa is getting a bigger slice of the SACU cake, while the other three countries – Namibia, Botswana, Lesotho and Swaziland – share the remainder.

The four countries have been negotiating for a different formula that would see all the members getting the same share, but South Africa has been reluctant on the issue.

According to Schlettwein, member states should aim for a more balanced view on the revenue sharing formula through which they can all benefit.

He further said despite the drag on the SACU revenue sharing formula and the perceived dependence on SACU receipts, Namibia’s stance is that revenue matters cannot be seen in isolation.

Despite the stalled progress regarding the current SACU revenue sharing and institutional arrangements, Schlettwein said Namibia expects to benefit from the envisaged Tripartite Free Trade Agreement between and among the Common Market for Eastern and Southern Africa (Comesa), East African Community (EAC) and the Southern African Development Community (SADC), which could be launched in June this year.

“This promises for a larger market of some 625 million people and representing about 58% of the continent’s gross domestic product (GDP),” he said.
Schlettwein, however, said Namibia’s capital and financial account recorded an increased surplus, primarily due to large net capital inflows from other long-term investment, albeit not enough to offset the deteriorated current account deficit.

“These inflows were due to increased borrowings by the private sector, especially in the mining sector,” he explained.
Better SACU receipts are expected to support Namibia’s robust growth in domestic revenue streams, which are estimated to be N$53,91 billion for the 2014/15 financial year. This represents a 28,6% increase over revenue collected the previous year and about 2,7% better than the budget forecast.

Source: The Namibian

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