Wednesday, November 25, 2020

A stingy economic path ahead in the face of despair

It seems a frugality what the government ‘intends’ to practice to see through the economy in the next six years  

Botswana, according to the September 2016 African Markets Revealed report, will for the period between 2017 and 2022 be drawing from the government purse an amount of P370.2 billion to spend on projects and programmes under the upcoming medium term plan (NDDP 11) into which annual budgets will be tied. 

The P370.2 billion is expected to be funded largely by mining sector revenues. 

“During the execution phase, the authorities intend to run a deficit of no more than 4 percent of GDP in the first two years under an Economic Stimulus Programme (ESP) that will later give way to surpluses in the remaining three years. Over the entire programme, government aims to raise a total of P372.3 billion in revenues, resulting in a cumulative surplus of just P2.07 billion. 

“Implementation of this project should help put Botswana well on its roadmap to diversifying away from the dominant diamond sector into other important sectors such as agriculture, construction, manufacturing and tourism,” reads the report compiled by Stanbic Bank. 

The government’s budget strategy paper, on the other hand, projects the budget deficit to run into the next three financial years 2017/18, 2018/19 and 2019/2020.  

The ESP was introduced in September 2015 in isolation to both the long term development plan (Vision 36) and NDP11 whose implementation had been postponed and which was expected would come into effect in 2017. 

The report, however, mentions that NDP 11 is geared to increase investment in infrastructural projects in key areas such as construction, energy, tourism and transport, with the view to further diversify the economy away from the dominant diamond sector.

 “Although the plan is meant to kick in next year, we believe that administrative and other logistical delays could mean that effective execution only realistically begins in 2018,” postulates the report. 

The report attributes the expected deficit into 2017 and 2018 to the three-year ESP which was introduced to abate the economic slowdown and provide a cushion to the global economy volatility. It seems that ESP and NDP 11 focus on the same key projects which could suggest that the former should have been implemented in tandem with the latter rather than in separation.   

The report also mentions that in the short term the 2016/17 budget anticipates to raise P48.4 billion which is P3.4 billion lower than the estimated P51.8 billion raised from the previous year, attributable to the depressed commodity prices and anticipated lower customs and excise revenue.   

SACU transfers from the government of South Africa to the region, highlights the report, are budgeted to decline from R51 billion in 2015/16 to R39.5 billion in 2016/17.  

“Sadly, the bulk of the developmental budget o P14.82 billion is to be allocated to the security cluster, with the rest going to the minerals, water, energy, transport and housing departments. On the whole, total expenditure and net lending is budgeted at P54.4 billion, resulting in a relatively modest deficit of P6 billion or 3.6 percent of GDP. We expect the deficit to be easily financed through the issuance of domestic bills and bonds,” posits the report. 

The concern with allocation to the security cluster is that the direct multiplier effects are not obvious in terms of contribution to GDP. This is particularly so because of Botswana’s urgency to diversify its economy which is expected to generate new revenue streams as the current paths are waning off. 

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