Fuel subsidy to put budget under pressure
Easing the burden on consumers
A subsidy is a form of financial aid or support extended to an economic sector.
Subsidizing fuel from the national budget will ease the burden on consumers as Namibia is vulnerable to international oil prices. The Ministry of Mines and Energy has on numerous occasions pointed out that fuel in Angola is cheap because it is highly subsidized by the government.
According to the Institute of Public Policy Research (IPPR), while subsidzing fuel will ease the burden on consumers, the trouble with this is that policymakers, already facing severe fiscal constraints, would not know how long they would need to subsidize fuel for and expose themselves to open ended expenditure commitments. Subsidies once granted generally prove hard to withdraw at a later stage. In addition, fuel subsidies generally fail to benefit those worst off in society and it could be argued there are more effective ways of targeting the worst off, IPPR said.
In February, N$70.8 billion was budgeted for the current financial period (2022/23), of which N$59.7 billion was expected to be obtained from government revenue and grants.
Furthermore, the public debt stock was expected to increase to N$140.2 billion, equivalent to 71.0 percent of gross domestic product (GDP). The deficit was estimated at 5.6% of what the country produces.
Moreover, interest payments were projected to increase to N$9.2 billion in the current financial year. Finance minister Ipumbu Shiimi is expected to table the mid-term budget review tomorrow.
Local analysts expect the minister of finance to provide clarity on how civil servant salary increases will be funded, which are estimated to cost the government N$1.2 billion.
Another option
A move to ease the burden on consumers, the second option is to try and negotiate special deals with selected oil exporters, IPPR said.
Whilst Russia might be desperate to cultivate friends and allies in its perceived struggle against the West and Namibia has good relations with Russia, importing oil from Russia might entail more geopolitical problems than it is worth even if it can be arranged. There was a stage when Namibia was developing warm relations with Venezuela but this never amounted to concrete shipments of petroleum products. At a time when Namibia is cultivating a strategic energy partnership with the European Union, now would not be a good time to buy oil from Russia, IPPR added.
For the month of October, the price of petrol decreased by N$1.00 per litre, while diesel remained unchanged.
The ministry reinstated the road user charges (RFA) and MVA levy to their original levels while the NAMCOR levy remained at the current level until further notice.
Fuel prices in Walvis Bay currently stand at N$20.08 per litre for petrol and N$22.12 per litre for diesel. –[email protected]
According to the Institute of Public Policy Research (IPPR), while subsidzing fuel will ease the burden on consumers, the trouble with this is that policymakers, already facing severe fiscal constraints, would not know how long they would need to subsidize fuel for and expose themselves to open ended expenditure commitments. Subsidies once granted generally prove hard to withdraw at a later stage. In addition, fuel subsidies generally fail to benefit those worst off in society and it could be argued there are more effective ways of targeting the worst off, IPPR said.
In February, N$70.8 billion was budgeted for the current financial period (2022/23), of which N$59.7 billion was expected to be obtained from government revenue and grants.
Furthermore, the public debt stock was expected to increase to N$140.2 billion, equivalent to 71.0 percent of gross domestic product (GDP). The deficit was estimated at 5.6% of what the country produces.
Moreover, interest payments were projected to increase to N$9.2 billion in the current financial year. Finance minister Ipumbu Shiimi is expected to table the mid-term budget review tomorrow.
Local analysts expect the minister of finance to provide clarity on how civil servant salary increases will be funded, which are estimated to cost the government N$1.2 billion.
Another option
A move to ease the burden on consumers, the second option is to try and negotiate special deals with selected oil exporters, IPPR said.
Whilst Russia might be desperate to cultivate friends and allies in its perceived struggle against the West and Namibia has good relations with Russia, importing oil from Russia might entail more geopolitical problems than it is worth even if it can be arranged. There was a stage when Namibia was developing warm relations with Venezuela but this never amounted to concrete shipments of petroleum products. At a time when Namibia is cultivating a strategic energy partnership with the European Union, now would not be a good time to buy oil from Russia, IPPR added.
For the month of October, the price of petrol decreased by N$1.00 per litre, while diesel remained unchanged.
The ministry reinstated the road user charges (RFA) and MVA levy to their original levels while the NAMCOR levy remained at the current level until further notice.
Fuel prices in Walvis Bay currently stand at N$20.08 per litre for petrol and N$22.12 per litre for diesel. –[email protected]
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