A national budget is the government’s financial roadmap. It sets out how much revenue is expected and how public funds will be allocated to key priorities and sectors.
But where does government revenue come from? Who decides how it is distributed? And what happens when ministries do not spend their allocations?
Every year, the government tables the national budget, outlining projected revenue and expenditure.
The Acting Director of Budget Management and Control at the Ministry of Finance, Lysias Kafidi, explained where government revenue comes from.
“Everybody pays tax, and tax is the main source of government revenue. The government also gets money through donations. They also get money through grants, levies, customs and other sources,” Kafidi said.
He said Namibia’s membership of the Southern African Customs Union (SACU) also contributes significantly to government revenue.
“Namibia is a member of SACU, and all receipts from customs are paid into a pool at SACU. Thereafter, SACU distributes the funds. So there are SACU receipts, which make a significant contribution to our revenue, in addition to taxes,” he said.
Once collected, revenue is deposited into the Single Treasury Account, from where it is allocated according to national priorities.
“We adopted something called the Single Treasury Account, where all the revenues I mentioned earlier are deposited. The custodian of the State Revenue Fund is the Minister of Finance,” Kafidi said.
He said the Minister of Finance plays a central role in distributing resources to various sectors and ministries, but that the process is guided by national priorities and development plans.
“The Minister of Finance proposes the distribution, Cabinet endorses it, and thereafter the minister tables the budget in Parliament. The legislature then debates it and finally decides on the allocations. So Parliament gives final approval to the allocations,” he said.
Kafidi said underspending does not necessarily mean that funds have been mismanaged.
“If the money could not be spent for whatever reason, then it should not be spent unnecessarily. It can be suspended. But if you do not spend what has been allocated and you also do not request its suspension, then it is what we call financial indiscipline,” he said.
He explained that money returned to the Treasury does not mean that physical cash has been sent back.
“Sometimes you also hear of money being returned to the Treasury. It is not a suitcase full of money coming back. It only means that the voucher or authority they were given has expired and they have not spent the money,” Kafidi said.
He added that underspending by one ministry could also reduce the government’s borrowing requirements.
“If one ministry is underspending, it can also mean a possible reduction in borrowings. That means it is not entirely a bad thing, because it can also reduce the borrowing cost,” he said.
Kafidi said larger allocations to sectors such as health and education reflect their broad mandates and the cost of delivering essential public services.
“You go back to the mandate of those specific ministries. Some mandates are so huge, and the implications are also vast when certain things are not done,” he said.
“For instance, medicines are not cheap. Building hospitals is also not cheap. Maintaining them is another thing. Staff are also not cheap,” Kafidi said.
He said the same applied to the education sector.
“We have a policy of education for all. The expectation is that everybody must be in school. If you want to stimulate your economy, you also have to invest in economic sectors and public investment,” he said.
“If you want proper roads and infrastructure in the country, they do not come cheap. Hence, you see those big chunks going to those ministries,” Kafidi added.
He said changing economic conditions could also force the government to adjust its spending priorities.
“We have to compress and cut spending because the revenue was not really coming in. What it means is that we have to do more with less. It is not an easy one. The idea is that we try to make every dollar count,” Kafidi said.
He added that international developments could affect fuel prices and government spending.
“Certain things change. You have also seen how the war in Iraq, Iran and so forth has had a negative impact on the price of fuel. The government subsidised us, and that was a benefit for everybody,” he said.
As the government reviews its spending, funds can still be redirected to areas of greater need. The objective is to ensure that the government lives within its means while making every dollar in the national budget count.