Wednesday, July 17, 2024

2020 Budget: Botswana can’t spend her way out of slowdown

By the time you read this, the country’s new finance minister – Thapelo Matsheka would possibly be hours away from reading his maiden national budget speech slated for 03 February 2020 at the Parliament buildings in the capital Gaborone.

Local economic pundits agree that a key highlight from Matsheka’s presentation will be telling the nation that Botswana is on a sticky wicket as far as government revenue is concerned.

As it stands, Botswana has no option but to meet the new economic reforms urgency as outlined by amongst others the International Monetary Fund (IMF).

A local investment analyst – Tshegofatso Tlhong says on the revenue side, there is still potential for Botswana to broaden the tax base by plugging existing tax leakages or instituting increases in income taxes and VAT.

“This is a key area of interest for us as we will be looking to see what measures are taken to boost government revenues in an environment where mineral revenues are expected to decline, along with revenues from the SACU Common Revenue Pool,” says Tlhong who works as Portfolio Manager at Kgori Capital – a local asset management firm.

Tlhong’s observation is in line with recommendation made by the International Monetary Fund for Botswana.

In 2019, the IMF said that Botswana’s fiscal consolidation should start as urgently as 2020. The consolidation, IMF said, should be supported by both expenditure and revenue measures beyond those considered by the treasury.

In October 2019 Botswana’s 2020/21 fiscal deficit forecast was revised upwards by the Treasury to 3.8 percent of gross domestic product from 3.5 percent, as revenue growth slows against rising expenditure commitments.

The diamond rich nation has been recording budget deficits since the beginning of NDP 11 in the financial year 2017/2018 which went up to P1.98 billion. The budget stayed in the red in 2018/19 (P6.35 billion) and is anticipated to post another negative balance of P7.79 billion for 2019/2020. A P6.94 billion deficit is also forecast for financial Year 2020/2021.

Naledi Madala – an economist who works at Barclays Bank Botswana says she expect the national budget to focus and reflect the four national priorities areas that government has selected being; building human capital, provision of appropriate infrastructure, promotion of export led growth and ensuring a more efficient government spending and financing.

Madala blamed theslow implementation of reforms at government enclave which she says has been a major setback for the local economy and remains an area of improvement.

Another economist, Sethunya Sejoe of Econsult Botswana says there is need to improve public sector quality and efficiency especially in procurement as this is important for improving the quality of business environment, and with implementation of essential business reforms encourage private sector growth.

While Botswana still has some fiscal space that allows a gradual adjustment, fiscal consolidation is anticipated to start in FY2020, supported by both revenue and expenditure measures.

IMF says it supports Botswana’s objective to return to a fiscal surplus over the medium term in line with the country’s track record of fiscal discipline.


Read this week's paper