Government Spending And Economy Of Namibia - Free Essay Example

Discussion on Government Spending and its impact on the Economy of Namibia Introduction Based on the information found on the internet, government spending in Namibia is averaged to be N$ 1 504.55 from 1980 until 2017, reaching an all-time high of N$ 28 747 in 2017 and record low of N$ 6120 in 1980. Namibian government spending (2018, para.1). Government spending takes several forms. Grant (2000, P. 296) defines government spending as spending by public sector, such as expenditure by the central and local government and any loans or grants to the nation as well as on goods and services. This essay explains the issues of government spending, and its importance to the economy of Namibia. Government spending on public goods All governments spend huge amounts of money on different services in their country. That is to say, the Namibian government spends money on services that are a necessity to the Namibian citizens such as education, defence, health care, old age pension and poverty eradication programmes. An example of this is the budget of the money that was allocated by the Minister of Finance Honorable Schlettwein in the speech that he gave recently for 2018 budget speech(2018,para 4). The budget speech contained the money allocations as following: Defence: N$ 6 billion, health and social services: N$6.5 billion, old age pension is increased by N$ 50. 00 per month, poverty eradication and social welfare: N$3.4 billion. These are the current expenditure, that is to say spending of day to day running of public services. Government spending on capital goods In addition, the Namibian government also spends on social infrastructure and capital goods. Tarirai (2011, p.2) defined capital goods as goods that are used to produce other goods such as machinery. In Namibia, the backbone of the economy is agriculture, and thus the government tries by all means to uplift and bring this very sector to its fullest potential in order to ensure an adequate supply of food to all citizens. It is for this reason that the Namibian government spends mostly on farming machinery, advanced equipment, and effective farming methods like pest control methods, fertilizing methods, hay making, animal feeding and other obsolete from machinery. That is to say, by spending on capital goods, the Namibian government helps stabilize the economy of the country by contributing towards the Gross Domestic Product (GDP) produced by the country in a year. Government spending on transfer payments. The Namibian government also spends intensely on transfer payments. These are payments to pensioners, the unemployed and subsidies to producers. They are designed to provide income or increase the income of vulnerable groups and in the latter case, may also be used to increase the output of particular goods and services. Grant(2000, p.32).In Namibia, the government spends about N$ 3.4 billion annually on transfer payment according to Finance Minister, Calle Schlettwein. As stated earlier, the Namibian government allocates massive amounts of money on the above mentioned sectors. The government can either overspend, which might have negative impacts on the economy, or contrary to that, spend just adequate amounts which might bring about economic growth, and thus having a positive impact on the economy. Positive impacts of government spending on the economy First and foremost, governments benefit the economy at large in various ways; directly or indirectly .To begin with, the Namibian government aids the government farmers with the production process through sponsoring, financing and subsidizing. Through this, they produce at lower costs, production increases and in return the total output produced by Namibia increases, leading to an increased GDP. This, in return, allows for an increase in job opportunities, as more people are required to produce at various farming firms countrywide, as well as selling. Also, as the government helps the unfortunate citizens and other vulnerable groups, it helps with the equal distribution of income and other resources. This narrows the gap that exists between the poor and the rich. Government spending on health care also enables the Namibian citizens to be healthy and able-bodied enough to drive the Namibian economy to its highest peak of production as well as development. On top of that, due to the fact that the Namibian government spends on the upgrading and the development of our education system, well educated citizens tend to find suitable, well-paying jobs that will, in return, help to decrease the unemployment rate and improve living standards in Namibia. Negative impacts of government spending on the economy In some cases, government spending exceeds taxation, which is bad for a countrys economy. In most cases, it might lead to a deficit. This has a bad impact on the economy and it might leave the country in debt. Inflation may also occur; which is the rapid increase in the price of the goods due to the exceeding demand to supply. This occurs when government over-subsidizes firms and they overprice their goods because they are in great demand in the market. Overall, government sometimes spends on factors that are not beneficial to the whole country at large, but instead only to certain e-lite groups such as politicians. This has a negative impact on the economy, because more money is spent on the taxes that come in, and therefore a deficit is experienced. When a country experiences a deficit, it tends to suffer from countless problems such as unemployment, inflation and rising interest rates, and thus low investments in the long run. Conclusion In a nutshell, as the Namibian government goes about spending on different sectors that help run and develop the country, there are good outcomes as well as bad ones. Spending is necessary in order to bring about development in a country, and thus, the government cannot avoid that. Reckless, excessive and fraudulent spending; however, is very dangerous to any countrys economy. It brings about a huge gap that exists between the poor and the rich, doesnt allow for the equal distribution of wealth among all citizens in a country and lastly, hinders development. Transparency and truthfulness are therefore very important virtues that are vital for the survival of any countrys economy. Reference list : 1.Namibia government spending.(2018) retrieved from https://tradingeconomics.com./Namibia/governmentspending. 2.Grant,SJ.(2000). Introduction to economics .Singapore .Pearson Education Limited. 3.Budget speech 2018/19 for Namibia.(2018) retrieved from https://www.nbc.na/news/some highlights-namibia20182019.budget.16533 4.Tarirai, N .(2011) .Economics NSSC Excellent for grade 11 and 12.Namibia.Zebra Publishing (pty) Ltd.