As expected Kenneth Matambo’s moment with the public came and passed on Monday.
It was a largely predictable budget speech in which the minister was expected to announce cuts in expenditure and no salary increment to the civil servants.
The key aspect of the national budget read on Monday is a raft of austerity measures that will help curb the country’s deficit and help avoid a possible debt trap.
To his credit, the minister is aware that continuing with excessive spending will only create difficulties when the economy is finally out of recession.
The minister wants to puts the country on a good pedestal in preparation for the post-recession period. That is good and hopefully he is not playing politics by withholding salary increments now and does it on the eve of General Election.
Minister Matambo has cautioned against putting the country in a debt situation from which it will be difficult to come out.
Exposing the country to excessive borrowing will mean the country gets mortgaged to international lenders whose list include the World Bank, African Development Bank, OPEC Fund for International Development (OFID) or Arab Bank for Economic Development in Africa (BADEA).
Sensing that Botswana could fall into debt trap as the recent example of Greece, Ireland and Portugal, the minister acknowledged the danger and revealed that going forward the focus will be on debt and finance management.
For Botswana, debt management is an important area not just that it helps the country to negotiate the pitfalls, but more importantly because never a net borrower, we are still very new to the subject.
Here it must be emphasised that Botswana is not yet over-borrowed and it is commendable that Matambo finds it prudent to address the situation as early as now.
The law on the extent to which Botswana Government can borrow is very clear, and so far from the minister it is clear that as a country we are well within our limits.
At the end of the 2009/10 financial year, the internal ratio stood at 6.8 percent of GDP, while the external ratio stood at 12.5 percent of GDP.
But, it is scary that while by the end of the current financial year the internal debt ratio would have fallen to 6.4 percent, the external debt ratio would have risen to 19.1 percent of GDP.
This is due largely to the drawing down of the budget support loan from African Development Bank (AfDB) and loans for major infrastructure projects.
While it is clear that we are within limits, care should be taken, especially with regard to external borrowing.
It is not a secret that Botswana continues to get easy money as a result of the country’s enviable creditworthiness ratings.
We commend Minister Matambo that he will be approaching Parliament to request for authority to borrow locally as there is readily available capital in the domestic market.
The local commercial banks, insurance companies and pension funds have plenty of cash running into tens of billions of pula.
Although, it is argued that borrowing locally will not come cheap, the minister, who is a former corporate leader, understands that borrowing locally will support the fledging capital markets.
Further, by so doing, he will avoid the foreign exchange risks that are associated with international debts.
But what is important is to allow a wider participation of market players unlike under the current situation.
The size of bonds will also need to be expanded to develop a well functioning system unlike where people lock in until the maturity of the paper.
Some of the things that government needs to do include listing some of the institutions in a bid to offload some of the responsibilities while at the same time empowering Batswana.
Listing such institutions will provide a cheaper way of raising cash in the market over and above improving efficiencies and corporate governance.
It is commendable that state companies like Botswana Telecommunication Corporation (BTC) will now be going for Initial Public Offering route rather than finding strategic partners as was initially suggested.
The floating of 49 percent of the telecommunications corporation on the Botswana Stock Exchange (BSE) will mean that pension funds and other Batswana will own shares on beMOBILE and BTC (Fixed).
