Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698746471469.pdf (Namibia)
Republic of Namibia Reply by the Minister of Finance On Matters Raised during the Second Reading of the 2017/18 Appropriation Bill and the 2017/18- 2019/20 Medium Term Expenditure Framework Calle Schlettwein, MP Minister of Finance 29 March 2017 Honourable Speaker, Honourable Members, Fellow Namibians 1.

I rise to respond to the questions, the during raised Appropriation Term Expenditure Framework.

Second Bill and the 2017/18 Reading comments and matters 2017/18 - 2019/20 Medium the of 2.
As I have stated during the tabling of the Appropriation the 2017118 Budget to the revised macro-fiscal and MTEF seek to align the Bill, and support budget economic by mitigating some of the deep spending cuts heralded by the Mid-Year Review policy stance.

and social development framework objectives growth 3.

I listened objectively to the issues raised during the Second the input and suggestions Reading of the Bill.
I appreciate improve the budget process, made as they will no doubt budget policy and allocative efficiency going forward.

4.

I wish to thank the Honourable Members, particularly those support and the who have taken the floor for their general comments and proposals made.

5.

Additionally, Honourable Speaker, community the business I had the privilege to on the budget proposals engage since the tabling of the Appropriation Bill on the 8th March 2017.
During these interactions, to appreciate how the public largely embraced the Budget and I expressed confidence thank the support and expert views provided.

in the medium-term budget policy.

I had the opportunity and the business the public community for 6.

I wish to thank you Honourable Members, political parties and the public at suggestions made.

following: In particular, the respective large for the specific I wish to thank the 6.1 Hon.

Nico Smit 6.2 Hon.

Elma Dienda 6.3 Hon.


Mike Kavekotora 6.4 Hon.

Dudu Murorua 6.5 Hon.

Meundju Jahanika 6.6 Hon.

Clara !Gowases 6.7 Hon.

Jan Van Wyk 6.8 Hon.

Benson Kaapala 6.9 Hon.

Ester Anna Nghipondoka 6.10 Hon.

Stanley Simataa 6.11 Hon.

Veicco Nekundi 6.12 Hon.

Tom Alweendo 6.13 Hon.

Peya Mushelenga 6.14 Hon.

Heather Sibungo 6.15 Hon.

Lucia Iipumbu 6.16 Hon.

Evelyn !Nawases- Taeyele 6.17 Hon.

Leevi Katoma 6.18 Hon.

Maureen Hinda 6.19 Hon.

Itah Kandjii-Murangi 6.20 Hon.


Christine //Hoebes 6.21 Hon.

Faustina Caley DTA DTA RDP UDF NUDO RP UPM WRP SWAPO SWAPO SWAPO SWAPO SWAPO SWAPO SWAPO SWAPO SWAPO SWAPO SWAPO SWAPO SWAPO 7.

Honourable Speaker, the interventions made refer to various sub-themes of the Budget and Budget policy.

I will respond to the questions raised and proposals made, from the thematic perspective.

As such, I may not necessarily refer to the names of the Honourable members in relation to each contribution made.
2 of functions, 8.

The main thematic issues raised are in regard to (i) the transparency and parliamentary the budget process and oversight expenditure outlook, (iii) domestic policy interventions and outcomes, (iv) budget allocations to various sectors, and (v) structural policy reforms and infrastructure development.

(ii) macro-fiscal projections TRANSPARENCY FUNCTIONS AND PARLIAMENTARY OVERSIGHT 9.
Honourable Speaker, some questions and comments were raised in regard to the openness of the budget process and the mechanisms and supervision functions.

Hon.

Kavekotora from the RDP and Hon.

Jahanika from NUDO particularly emphasized on these matters.

parliamentary oversight for 10.

In respect to the openness and participation, Namibia is ranked 9th in the Open Budget Index for Sub Saharan Africa.
This better regional rating results from the various facets of openness and public participation which are embedded in our budget process.

11.

The essence of the introducing the MTEF methodology in the budget process way back in early 2000s is for the budget system to go beyond the short-termism of a single year budget and provide for up to two years of indicative inform the indicative expenditure allocations which will budgets for those years.
12.This information is provided well legislature and the public, unfettered opportunity to make input preparation and tabling of the budget.

in advance to the thus affording the legislature in advance of the 13.In addition, Honourable Speaker, the Mid-Year Budget Review reform initiative was added to the budget process 3 since 2015116.

I have emphasized the policy significance of the the Mid-Year Review.
Contrary to the assertion that legislature has no advance access to the assumptions the Mid- Year Review Policy underpinning the budget, to provide such information as Statement goes in detail well as the budget priorities at in advance of the tabling of the budget.

three months least 14.I urge the Honourable members to make full use of the wealth of this information.
15.The proposals for establishing a Parliamentary Budget Office or Budget Committee are enshrined in the principle upon which the Public Accounts Committee is founded.

Such proposals can be further investigated with the view of establishing and supervision functions can be further enhanced.

parliamentary how the oversight 16.

We have been open to consultation and transparency at it should be the responsibility for determining the budget many stages of the Budget process.
However, noted that continues to rest with the Executive.

MACRO-FISCAL OUTLOOK PROJECTIONS AND EXPENDITURE 17.

Honourable Speaker, some questions and comments were raised by Honourable Nico Smit on the budget policy and the macro-fiscal projections which anchor the budget and medium-term outlook.

18.

Comments were also made on the linkages between the and the Mid- Year Budget Review Policy Framework budget.
4 19.In this regard Honourable Speaker, allow me to once again emphasize the policy significance and empirical meaning of the Mid-Year Budget Review.

20.
The Mid-Year Review is an added facet to the Budget process and brings forth three notable advantages, namely:- • policy flexibility to align the budgetary framework to the dynamics of economic and fiscal environment, thus enhancing timeliness of policy action and policy adjustments as the exigencies of the situation dictate, • promote allocative efficiency, by freeing up funds and internal savings for reallocation to priority areas in and development pursuit results, and of quality of spending transparency by making advance • enhancing budget announcement of the medium-term budget policies well in advance of the budget, thereby according the to legislature interrogate the envisaged budget policies and the budgetary framework.
ample opportunity and the public 21.

This is the policy context and implementation utility that the Mid-Year Budget Review innovation brings.

22.
22.

Some of the observations made found peculiarity in the fact that the macroeconomic and revenue projections set out in the budget do not significantly differ from the Mid- that was published and Year Review Policy Statement tab led in this House in October 2016 and that such insignificant changes implicates the validity of the policy framework underpinning the budget.
5 23.Honourable Speaker, in FebruarylMarch in a credible and plausible policy large variations to a environment, one should not expect and the projected outlook made in OctoberlNovember revisions made following the calendar year.

To the contrary, if such large changes occur, then the plausibility of the forecast comes into question.
There is thus no policy inconsistency when the budget outlook is in sync with the policy stance announced in the Mid- Year Budget Review and its assumptions, save when significant developments have occurred.

of 24.As I have stated, this is exactly one of the objectives of the advance Mid- Year Budget Review in that announcement of the outlook in advance of the budget.
In this framework the policies and underlying macro-fiscal framework do not come as a surprise to the legislature, Budget Votes and the public.

it provides 25.Honourable Speaker, let me further emphasize that if and when adjustments have been made to the overall spending ceiling of the original budget, the policy reference going forward is in respect of the Revised Budget.
In other words, when the expenditure adjustment and suspension of N$4.5 billion were made during the 2016117 Mid-Year Budget the 2016/17 resulted in the adoption of Review, Appropriation Amendment Bill, setting forth the revised budget upon which the Budget execution and all fiscal indicators will be assessed.

Thus, to make reference to the original budget is merely notional and an abstraction from the reality that change has occurred.

this by Honourable 26.


One of the perceived potential risks for the budget that was and portrayed reliability of the N$19.60 billion from SACU projected in the budget, which represents about N$5 billion increase from N$14.07 billion received during 2016/17.

the viability Smit is 6 27.

Honourable Speaker, this concern is allayed by the provisions of the SACU Agreement on the revenue sharing formalities.
In order to avert unforeseen volatility in SACU revenue and abrupt changes during the budget year, SACU revenue shares are determined by the SACU Council of Ministers well for all SACU in advance of the budget Member States.

The budget projection for SACU receipts is not speculative, but a firm revenue share.

Member State shares for 2017/18 were decided by the SACU Council of Ministers in December 2016.
Such shares will be remitted to members on quarterly basis as per the provisions of the SACU Agreement.

They are, however, ex-ante payments to be audited a year later.

is further assuaged by the fact years of 28.

The prospect of a potential negative adjustment as a result in the of the audit subsequent the MTEF, we have projected moderately lower revenue outlook in order to incorporate potential volatilities emanating from subdued economic environment in the region.
that 29.Honourable Members, these plausibility expenditure and taking cautionary provisions into consideration, I wish to reaffirm to the House that due care has been taken to align revised macroeconomic budgetary to the the Mid- Year Review and outlook as incorporating thereafter reflected in the Budget and MTEF.

However, this does not suggest that the economic environment will remain static going forward.

We should retain the flexibility to adjust to emerging developments.
contained any developments in latest 30.

One item of expenditure that has attracted particular attention in the recent debates has been the civil service this wage bill.

I think we are in general agreement that 7 wage bill is high and is pushing the limits of sustainability both in its level and its rate of growth.

For this reason, the is currently working on a Office of the Prime Minister combination of measures to address this issue.
These may include natural attrition, which, where applied, will be done in a managed way, so that key positions will continue to be filled when they fall vacant.

This attrition solution is not expected to be a panacea, but would take its place among various other measures.
DOMESTIC POLICY INTERVENTIONS AND OUTCOMES 31.Honourable Speaker, comments were also made in regard and of some of the to domestic policy interventions, policy outcomes progress made in the implementation interventions, particularly in the education sector.

32.

In this policy budget respect, has framework the emphasized the alignment of the budget to the national priorities.

The national policy priorities are set out in the Harambee Prosperity Plan and the sectoral development plans.
expressions 33.In all areas of policy, good governance is essential to the achievement of our desired outcomes.

I therefore welcome the from several Honourable Members for the fight against corruption, and reiterate that we must unite in the drive to eradicate such governance Issues.

support of 34.

The fiscal adjustment phase which we have embarked on, presents opportunity to increasingly align the budget to key national priorities as the fiscal space improves.
This budget is a commencement of this process.

8 35.

Indeed, Honourable Speaker, Namibia has made commendable progress on several fronts, and this was thanks to the implementation of policy packages to bring about and improve living standards.

socio-economic development • the size of the economy has expanded and real incomes have grown to propel Namibia in the legion of Upper Middle Income Countries, • we have made progress inequalities Coefficient of o.
71 to 0.57, through growth, in reducing income from the Gini • extreme poverty by 2015116 and absolute poverty has reduced to 18 percent along the same calendar, to 11 percent has fallen • access to basic services, especially for education, health and portable water has expanded, • we have achieved free primary education and is committed to meeting the needs of Government a free secondary education and increased access training as resources to tertiary and vocational the is This become significant share of the budget that continues to be accorded to the education sector, available.
attested by • social safety nets are expanded in quantum and coverage, line of defence against poverty and vulnerability for beneficiary groups, and thus serving as the first • public revenue has grown in line with growth in to the economy, thus enabling the Government provide increasing services to more Namibians.

9 36.

Certainly, developmental challenges and opportunities still linger.
• the structure of preponderance on primary production and export, the economy is still narrow with • Unemployment is high, • The distribution of means of income remains highly skewed and inequality, though declining, is one of the highest by global standards, and • Poverty still high, levels are the deployment of multi-facetted sustainable approaches including the to poverty reduction and eradication, creation of the Ministry of Poverty Eradication and Social Welfare.
necessitating STRUCTURAL POLICY REFORMS AND INFRASTRUCTURE DEVELOPMENT 37.Honourable Speaker, I agree that for fiscal policy support the budget is a key to the economy and instrument social development.

38.

However, implementation of supportive policies is needed to compliment the budget and optimize the impact of fiscal policy, while promoting private sector investment and job creation.

39.
39.

In this regard, I am indebted to the Honourable members to the support in approving key policy reforms such as the Public Procurement Bill and the PPP Bill.

lO 40.

We are proceeding to implement the provisions of these key reforms so that their developmental goals are realised sooner rather than later.

41.
41.

Completion of the tax administration reforms for a semi- autonomous Revenue Agency and the modernization of the Public Finance Management law are of utmost priority over the coming financial year.

42.

With respect to the operations of Public Enterprises, repeated bail-outs of some of I these should state that enterprises constitute a drain on state coffers, while the under-performance of others denies the public reliable and services.
Hence the on-going review by the efficient Ministry of Public Enterprises is timely.

The reform process will not only ensure better governance, but will regain also bring about reduced reliance on the budget, efficiency and provide good returns on the shareholders, while improving the reliability of service delivery from these entities.

ALLOCA TlVE EFFICIENCY ACROSS VOTES 43.

Several interventions were made with regard to the relative weight of budgetary allocations to various Budget Votes.
This is in regard to, for instance, allocations to the Ministry of Poverty Eradication and Social Welfare and to the education sector.

44.

Honourable Members, we consistently emphasise that pro- poor and inclusiveness of the budget requires that priority should be given to the basic enablers such as skills formation, education and health, scaled-up allocations to economic sectors including agriculture, supporting SMEs and strengthening social safety nets.

11 45.
11 45.

I therefore wish to emphasise this Budget again that to the social continues to prioritize resource allocations sectors, such as education and health as basic enablers for economic advancement as well as alleviation of poverty and vulnerability.

46.

In this regard, to address some let me take a moment specific issues in relation to the Public Service Medical Aid Scheme.

authorised or 47.
authorised or 47.

I take this opportunity to inform the House that I have, in terms of Section 9(1)(b) and (d) of the State Finance Act ( Act No.31 of 1991), read with Section 9(2) of the same to N$200.00 Act, appropriated million total expenditure for 2016/17, to partially honour payments for medical services provided to members of the Public Service Medical Aid Scheme (PSEMAS).

This amount the could not be met by the provisions Contingency Fund.
amounting the of as amended, expenditure (0.33%) some of 48.

The payment is in respect of the medical services rendered to PSEMAS members and their dependants during 2016117 financial year, the cost of which lies in excess of the N$2.2 billion PSEMAS budget.

especially in certain 49.

The provision of medical services is a critical and essential service for the sustenance of life and the quality of life thereof, and emergency circumstances.
It is on the basis of these considerations that I have evoked this section of the State Finance Act to ensure payment for services rendered and thus ensure the continuation of smooth provision of medical services to the members ofPSEMAS and their registered dependents.

special 12 50.

Honourable Speaker, to provide context, PSEMAS has a total of 293,250 members and dependents of which about 124,000 are principal members and the rest are pensioners and dependents.
This membership and dependency ratio is and thus, about 13.1 percent of substantial in its impact to the population and households.

the total population 51.

The Namibia, administration of PSEMAS ensure to outsourced MetHealth administrative arrangement based on specialized expertise for the highly specialised range of health services provided to PSEMAS members.

is an to 52.
is an to 52.

In recent years, the scheme has experienced a significant rise in the claims ratio, resulting in the rapid rise of the budget allocated.

The N$2.2 billion budget for 2016117 is an increase of22.7 percent from the previous year (N$1.76 billion), while the membership has grown by only 5.2 percent over the same period.

53.
53.

Due to high and increased pattern of claims, the total allocated budget to PSEMAS was by and large fully spent by December 2016, resulting in the build-up of unmet costs for services provided.

The build-up of outstanding invoices has placed cash flow constraints on service providers.

As a some service providers had to demand upfront result, payments by members for services.

54.
54.

The Ministry of Finance, in collaboration with the associations of medical service providers, has launched an investigation into the high claims ratios and the practices of some of investigation has unearthed a myriad of alleged unethical claims practices by some service providers.

Such alleged fraudulent claims have been set aside for further in-depth investigation.

the service providers.


This 13 55.As an outcome of these investigations and to ensure the continuation of the provision of the essential services, Government undertook to honour an amount of N$200.00 million for the medical costs in this current financial year.

This equates to about 64 percent of the overdue payments in this regard.

The remaining amounts are budgeted for in the 2017/18 the continuation authorisation under over the coming month.

budget and will be paid as part of 56.


Honourable Speaker, strengthening the operational model for PSEMAS is critical for the sustainability of the scheme going forward.

The current investigations will equally deal with this matter.

At the same time efforts are underway to introduce a biometric card to help stem potential abuse and excessive claims.
57.In the meantime, the intervention taken to honour a substantial amount of the payments to service providers is aimed at ensuring critical and lifesaving service delivery to the membership ofPSEMAS.

This specific provision of the State Finance Act is utilized in special circumstances.

CONCLUDING REMARKS 58.

Honourable Speaker, to conclude, allow me once again to express my gratitude for the support shown for the budget by the Honourable Members and the public at large.

59.
59.

Significant emphasis was laid on the need for effective implementation of the budget, policy reforms to amplify the impact of the budget on development outcomes and innovative reforms to improve internal efficiency.

This cannot be further re-emphasized.

14 60.

In this fiscal consolidation framework, we are called upon to work collaboratively for sustainable development results and to do more with less.
61.I may not have answered each and every question individually, but I have attempted to cover the main topics.

My Cabinet colleagues will provide detailed clarifications, specific to their respective Votes and sectors, during the Committee stage.

62.

With these remarks Honourable Members, I thank you all for your support of the Appropriation Bill.

I thank you 15