Simonis Storm sees wider budget deficits than treasury forecasts

CHAMWE KAIRA

Simonis Storm forecasts a deficit of between 5.6% and 5.9% of GDP for the current financial year, above the treasury’s 5.5% projection.

For 2027/28, it expects a deficit of between 5.0% and 5.3%, compared with the government’s 4.8% forecast.

The projections point to a weaker fiscal outlook than the government’s latest estimates, as slower economic growth and lower-than-expected revenue weigh on Namibia’s public finances.

In its analysis of the 2026/27 Mid-Year Budget Review, tabled on 22 October, Simonis Storm said the government’s medium-term deficit projections had deteriorated, with the deficit for 2028/29 now estimated at 4.4% of GDP, compared with the 3.3% target set in February.

The deficit is projected to narrow to 3.5% of GDP in 2029/30.

Simonis Storm said the government had maintained its 2026/27 deficit forecast at 5.5% of GDP, equivalent to N$16.3 billion.

However, it warned that the fiscal position remained under pressure, with the primary balance, which excludes interest payments, expected to shift from a planned surplus of 0.2% of GDP to a deficit of 0.3%, or N$881 million.

The government has also lowered its economic growth forecast for 2026 from 3.1% to 2.3%. Growth is projected at 2.6% in 2027, while the mining sector is expected to contract by 10.6%.

The weaker growth outlook is expected to constrain revenue collection and complicate efforts to reduce the deficit.

Revenue and grants for the current financial year have been revised down by N$1.5 billion to N$88.1 billion from the February budget estimate of N$89.6 billion.

Tax revenue is expected to remain broadly unchanged at N$82.9 billion, but non-tax revenue has been reduced by N$1.4 billion to N$5.2 billion.

Administrative fees and charges are projected to decline by N$1.2 billion to N$2 billion.

Diamond royalties are expected to halve to N$347 million, while mining taxes, royalties and export levies are forecast at N$5.2 billion, down from N$6.1 billion.

Government expenditure has been revised down by N$1 billion to N$105 billion. Interest payments are projected at N$15.4 billion, compared with N$16.2 billion in the original budget.

The reduction in expenditure includes an N$820 million cut to externally funded projects because of implementation delays.

However, operating expenditure has increased by N$490 million, while domestically financed development spending has risen by N$150 million.

Simonis Storm said ministries had requested an additional N$13.1 billion during the review process, but the net additions to the budget amounted to N$640 million. These includedN$535 million for the Public Service Employees Medical Aid Scheme (PSEMAS) and N$179 million for foot-and-mouth disease containment.

The research firm estimates that foot-and-mouth disease could cost the government N$1.8 billion over the 2026/27 and 2027/28 financial years through additional spending and lost tax revenue. Drought-related pressures also pose a risk to the fiscal outlook.

By September, 53.5% of the budget had been spent or committed, while development spending was 42% executed.

Public debt is projected to reach N$201.7 billion, or 68.7% of GDP, by March 2027, compared with N$179.5 billion a year earlier. The government expects the debt-to-GDP ratio to decline to 66.9% by 2029/30, a projection Simonis Storm said depends on nominal economic growth remaining between 7% and 8%.