Schlettwein on spending
Ndama Nakashole - Finance minister Calle Schlettwein has come to explain the increase in spending at the Ministry of Defence at a time when fiscal consolidation is at the centre of state finance decisions.
According to the Appropriation Bill tabled by Schlettwein on Wednesday, Defence will receive nearly N$5.96 billion in the 2018/10 Budget.
During a budget review hosted by PwC Namibia, Standard Bank Namibia, Liberty and Namibia Media Holdings (NMH) Wednesday evening, members of the public wanted to know why the defence ministry, in such a peaceful country, is getting nearly N$6 billion, which is higher than priority sectors, such as higher education’s N$3.2 billion allocation.
Schlettwein, during the question-and-answer session, said government too recognised that expenditure on defence is high, but this is a result of an old decision by parliament to up spending on defence.
He said parliament had decided that increased defence spending needs to be realised in order to maintain an ailing defence infrastructure, as well as ordering new equipment, as some infrastructure dated back to independence.
“During that time, the government went into fixed contracts that we cannot escape,” he said.
Schlettwein said the defence ministry is not performing useless activities as it carries out difficult tasks such as anti-poaching operations and international peace-keeping.
Members of the public further asked Schlettwein how the biggest allocation of nearly N$13.5 billion to the Ministry of Basic Education, Arts and Culture will impact public education and specifically, public schools. This ministry got the biggest chunk of the national budget, which has been a norm over the years.
Schlettwein said he noted that education benefited from generously high allocations in the past, and that Namibia ranks well in allocation of more money to education, which he said is a positive trend for the country.
He said as for education, budget allocations are not expenditures, but are an investment.
“It is an investment in our youth, so it is an investment in the future capacity of our country,” he said.
Asked whether the government in these trying times still subsidise private education, the minister said the government’s liquidity constraints over the past two years have made it difficult to subsidise private education. He added that subsidies for private education are provided for by the law because the government “believes spending on education is an investment”.
Another notable highlight in this year’s national budget is the allocation of N$2.5 billion to the Public Service Employees Medical Aid Scheme (PSEMAS). The scheme is getting a whopping 62.5% of the Ministry of Finance’s N$4 billion total allocation, Schlettwein said in his budget speech.
Schlettwein, during the question-and-answer session, said the funding of PSEMAS has reached unsustainable levels. His ministry is looking at ways in which to make the scheme sustainable, in a way that does not bring down the benefits of public servants.
Schlettwein added that the unsustainability of PSEMAS is not just caused by the way it is structured, but also various forms of fraud such as over-servicing, over-subscription and card fraud.
“During the year, we are introducing a biometric system because with card fraud, you actually service a much larger base than that which is covered,” he said.
The minister said they are in continuous consultations with the medical sector to best see how they can bring the scheme to sustainability.
In an interview with PwC Namibia, and screened during the review dinner, Allan Gray Namibia’s CEO James Mnyupe said government debt, which has gone up, is not a bad thing if borrowed money is used productively.
Mnyupe explained that when debt is taken, it’s taken to fund projects that bring income. He noted that every debt issued is going to fund those projects where the income is coming in. However, there is servicing of debt and the income generated is going to fund those projects with an aim of making more to fund new projects and attain financial stability.
“Debt is not a bad thing to issue but you must make sure that it increases income capacity of the country to sustain it,” he said.