Finance Minister Iipumbu Shiimi says the government will not write off post-independence debts owed by Local Authorities because it will not be fair for other institutions that have honoured their repayment agreement.
The current debt is at a staggering combined amount of N$133,841,612 in accrued interest as a result of none payment from 1990 until 2010.
“After independence, the government granted additional loans amounting to N$93,121,962 to the municipalities, town councils, and village councils from 1990 to 2010, for the upgrading and expansion of the Local Authorities infrastructures. These loans have now accumulated arrears on capital and interest as a result of non-payment to the tune of N$55,330,362 and N$78,511,250, respectively. Bringing the total arrears to the central government to N$133,841,612,” said Shiimi as he responded to queries raised by LPM member Henny Seibeb in parliament.
Seibeb was inquiring about government loans advanced to Local Authorities pre- and post-independence, this was amid concerns from Local Authorities that have raised that their requests to have debts written off has been shunned by the state.
However, Shiimi said the outstanding amount is for post-independence, adding that the pre-independence loans were entirely written off.
“Over the past years before and after independence, the central government has extended loans to Local Authorities (municipalities, town and village councils) for the upgrading and expansion of Local Authority infrastructure. A number of Local Authorities have indicated that they are not able to pay their loan with [the] government due to cash flow constraints. In 2002, Cabinet directed through its Decision No: 33rd/09.12.02/006, ‘That Cabinet authorised the Minister of Finance to write off N$127,318,502.01, worth of loans granted to Local Authorities pre-independence.
“However, the Cabinet Decision No: 33rd/09.12.02/006 only authorised the Minister of Finance to write off loans extended pre-independence and not post-independence loans. It was further resolved that the post-independence loans shall be offset against government debt for the municipal services or the municipality shall donate land to the government equal to the respective loans of such Local Authority that was extended post-independence,” he explained.
Shiimi further explained that the Cabinet directive was communicated to all the Local Authorities, through the Ministry of Local Government, Housing and Rural Development by then.
“This was communicated in a circular dated 21 April 2005, on the annulment of all loans to all Local Authorities. In this regard Local Authorities were informed to trade off their debt with either land or municipal services debt (e.g water and electricity) owed by O/M/As. Some Local Authorities responded positively by offering land to offset, and debt-to-debt swap,” he revealed.
The Minister pointed out the City of Windhoek, Municipality of Otjiwarongo, Municipality of Walvis Bay, Municipality of Swakopmund, and Municipality of Okahandja, as the only Local Authorities that are repaying their loans.
“There are also those municipalities that are exercising the option of debt-to-debt and debt-to-land swap, among them Otavi Municipality, which has usefully traded its debt with the exchange of land, while City of Windhoek is in a process to trade land against its On-lent loans by government.”
On a flipside, Shiimi said most of the local authorities responded negatively and insisted that their debt be written off, a demand to which the state is not entertaining, at least for now.
“We are of the view that it would not be fair to those that have committed and paid off their debt, nor does it present a good financial prudence. Thus, the Ministry of Finance continues to engage with Local Authorities and ensure that they honour their financial obligations to centraI government till such time a solution is found,” he said.
“I wish to inform this house, the Cabinet decision was implemented successfully and that there is no outstanding amount on the pre-independence loans. The statements referred to by Hon. Seibeb is therefore not for the loans that were extended pre-independence, but for the post-independence loans. It is in this context that I would like to emphasise that the Ministry of Finance is committed to exercise the debt-to-debt or debt-to-land swaps as per the existing directive,” he emphasised.
