Friday, December 1, 2023

BoB should provide clarity on how it intends to cushion the economy in case of Virus attack

Botswana’s economy, like the rest of the world finds itself facing the worst crisis since the global crisis that started in 2008.

The economic headwinds already sweeping then world have to do with coronavirus.

Botswana has not had even a single case confirmed. Yet there are already lingering questions over what the government could do in case the disease arrives.

There is a general consensus that the effects of coronavirus on the global economy will be large and much deeper than was initially estimated.

At stake will be economic growth, employment, wages growth and also general living standards.

A more widespread thinking seems to be that monetary policies on their own will be helpless to do much.

That leaves the fiscal policy, which for Botswana as we know is pretty much harm-strung when it comes to any room for flexibility and maneuver given the country’s fully stretched finances as seen in the national budget delivered clast month.

At the point of writing this commentary, Botswana was coronavirus free as no incident had been confirmed.

So far so good.

Yet even if things were to stay so for a foreseeable future, there is no doubt that companies will inevitably feel the pinch as a result of what is happening around the globe.

Many of the companies will experience declining incomes far worse than it happened in the global crisis, or when power shortages caused untold disruptions around 2012/2013. Botswana relies on

Botswana has never been an island.

It looks likely that by the time we are done with the effects of the storm coming our way, we would look back and say “it has never been this bad.”

To go through that storm and emerge from it would require proper cooperation between the monetary policy authority and also the fiscal authority.

At stake is far bigger than the country’s economic viability. Rather it is our survival as a nation.

Bank of Botswana has to provide leadership. Not only is the Bank an interested party, it also has by far the strongest brain power to coordinate the response effort as well as the financial war chest it manages on behalf of government to see the country through.

The superior intellectual firepower at Bank of Botswana gives them a competitive advantage when it comes to evaluating what tools and instruments to reach tout for and also which ones hold out the biggest promise to work out with minimal side effects.

All what is needed is for those with authority of the purse to acknowledge that it is better to defer their decision-making rights to others with expertise. Afterall Bank of Botswana come to this with very strong credentials.

All the Bank needs to remember is that extraordinary circumstances call for extraordinary responses.

Admittedly, and tragically, one might add, there are not many obvious options.

Even before it becomes imperative for authorities to know what action to take, the trouble is that Botswana’s economy was already weak even without the effects of coronavirus.

That looks likely to get worse because diamond sales are likely to be affected.

Even during the best of times, diamond sales are often weak at the beginning of the weak. And because diamonds are a discretionary purchase, they often are the first to be affected in the times of a crisis.

Even before dust has settled on the budget notes, it looks like government might be forced to provide a revised growth forecast note.

Fears are beginning to hurt growth. And from the look of things, fear of coronavirus is more potent than the disease itself.

Sectors like air travel and tourism haven early casualties. And again this happened even as there is still no official confirmation of a single coronavirus infection in Botswana.

Botswana relies heavily on tourism.

And reforms of the immigration Policy, that included application of Visa upon arrival implemented last year were beginning to bear fruits.

Coronavirus has been causing economic mayhem across the globe for well over three months now.

Nobody is for now able to predict when its spread will abate.

Botswana has so far been lucky.

For how long? Nobody knows.


Read this week's paper