The budget for 2011/12, including supplementary spending for public-sector pay increases announced on April 12th, projects expenditure of N$38.5bn (US$5.1bn), 39% higher than estimated in 2010/11, with the main purpose of lowering unemployment. By focusing spending on four sectors (agriculture, transport, tourism, and housing and sanitation), the government hopes to create or save 104,000 jobs during the next three years-the period covered by the new medium-term expenditure framework (MTEF). Current spending is projected to increase by 28%, but development spending is set to rise by 55%. In the latest five years for which actual figures are available (to 2009/10) the development budget has been underspent by an average of 15%. The Economist Intelligence Unit therefore believes it unlikely that the 2011/12 development budget will be executed in full, particularly given the sharp year-on-year increase. The budget estimate for revenue in 2011/12 is N$28bn, 23% up on last year, with most of the increase coming from substantially higher income and profits tax and receipts from the Southern African Customs Union (SACU). Last year's MTEF had projected a steep decline in Namibia's share of receipts from SACU; however, the new MTEF projects a 19% increase, which is in line with figures accompanying the South African budget, as even if a new revenue-sharing formula is agreed in 2011 the expected decrease in Namibia's share from the common revenue pool will not be felt until 2012. Assuming that the revenue projection proves to be broadly accurate, we forecast that the budget deficit will rise from an estimated 6.3% of GDP in 2010/11 to 8.4% of GDP in 2011/12.

The MTEF projects that the deficit will narrow to 5.2% of GDP in 2012/13, owing to a fractional decrease in expenditure (with current expenditure higher by 4% but development expenditure down by 24%) and a 14% increase in revenue resulting from a 35% increase in SACU receipts. We expect the increase in current expenditure in 2012/13 to be considerably higher than 4%, although the development budget will again be underspent. On the revenue side, we expect domestic tax revenue to grow by more than the 6% projected in the MTEF, although SACU revenue will begin to decline as the new revenue-sharing formula takes effect. We consequently forecast that the deficit will fall, albeit by less than projected in the MTEF, to 6.5% of GDP.

To cover the deficits, the government expects to increase its debt by more than 50% to N$27bn (US$3.8bn)-27% of GDP-in March 2012 and to 30% of GDP by March 2013. Around three-quarters of new debt will be raised on the domestic market.