As government moves to achieve a balanced budget in 2 years, the Minister of Finance and Development Planning is likely to read out a budget speech that is greeted with sombre faces not grins that characterised previous speeches during economic boom.
Civil servants and the construction industry are likely to feel the pinch as government moves to austerity measures in a bid to show that the economic recession has had an impact on the country that is heavily reliant on exports.
“The government budget will remain tight, with little or no increase in overall spending and a possible scaling down of development spending as well; there is unlikely to be an across-the-board public sector pay rise in 2011,” Bifm Economic Review for the 4th quarter of 2010 has suggested.
The argument is also supported by the Budget Strategy Paper (BSP), which will guide the 2011/ 12 budget. BSP lays the foundation for achieving a balance budget by 2012/13, which means the budget speech next week is likely to sacrifice some projects.
Botswana spent heavily during the recession as a way of keeping the economy running and avoiding a deep recession.
The country also undertook major public works, including airports, dams and roads keeping a large part of the able bodied population employed.
But it now seems spending will be curtailed in a bid to avoid the country falling into a debt trap and continues deficits.
Civil servants, who normally await the second Monday of every February to know whether they have been awarded a salary increase, might also be disappointed as a cut in recurrent budget is likely.
The Bifm economic review authored by Dr Keith Jefferis, the former Bank of Botswana deputy governor, has suggested that even with cuts in development spending, measures to contain recurrent spending will also be needed, especially the public sector salary bill.
“Given the need to reduce the deficit, and the unbudgeted public sector salary increase awarded in 2010, it is unlikely that the budget will include a general public sector pay rise,” the review said.
Government’s monthly wage bill is slightly above P700 million per month and increasing the salaries could have an impact on the government coffers.
Increasing civil servants salaries will dent government’s efforts to balance the budget also at a time when revenues from the customs union have been affected.
“The challenge of achieving a balanced budget by 2012/13 remains,” Bifm said.
“While this will be assisted by a continued recovery of mineral revenues, the overall revenue picture will be adversely impacted by the anticipated decline in SACU revenues, and hence the burden of fiscal adjustment will fall on the expenditure side of the budget”.
Bifm expects the budget speech to focus around revenue, spending and surplus/deficit forecasts.
Botswana is already running a deficit as a result of growing expenditure, but declining government revenues.
During recession, foreign exchange reserves declined with total revenues and grants falling by 8.8 percent from P30.455 billion in 2008/09 to P27.782 billion during the 2009/10 financial year.
