A public-sector pay increase of around 7% announced by the minister of finance, Saara Kuugongelwa-Amadhila, on April 12th will raise the government's wage bill in fiscal year 2011/12 (April-March) to N$11.1bn and increase the fiscal deficit. In a surprise announcement to parliament Mrs Kuugongelwa-Amadhila said that the budget would be amended during the committee stage of the appropriation bill to accommodate increases totalling N$844m. She added that the cabinet had approved the pay increases and that the government was negotiating with workers' representatives. The extra spending will drive up government debt and, local economists have warned, its inflationary effect may cause the Bank of Namibia (BoN, the central bank) to raise its repurchase (repo) rate sooner than it might otherwise have done.

Daniel Motinga, the chief economist of First National Bank Namibia, said that this major addition to expenditure damaged the budget's credibility and that it was difficult to believe that it was "an afterthought". Robin Sherbourne, of Old Mutual Namibia, described it as "an extraordinary way of budgeting", which highlighted the need for better planning to synchronise civil service pay negotiations with the budget cycle. It appears that the government was aware of trade union demands for a pay increase well in advance of the budget. Basilius Haingura, the general secretary of the Namibian National Teachers' Union, said that his union had submitted its pay proposals to the government at the end of 2010 and had been "very surprised" not to see them included in the budget.