Thursday, October 28, 2021

Botswana bags another multi-billion Pula loan, this time from AFDB

There is one certainty that will come out of the 2022 national budget speech when the minister of Finance and Economic Development takes it to the podium in Parliament in February: Botswana’s debt – both local and external local keeps growing. 

The government has been on a loan shopping spree lately both in local and external debt markets. The appetite to acquire more debt was first signaled in late 2020 when Parliament approved a P15 billion extension in the government bond programme. At the same time, external funding options have also been explored mostly from the development funding institutions (DFI’s). 

Last week it emerged that hardly a few months after the country approached and successfully obtained a P2.7 billion loan from the World Bank, another knock has been made by the country’s Treasury at the African Development Bank (AFDB) Group. This time around Botswana has secured US$137 million targeted to finance the country’s economic recovery from the Covid-19 pandemic. 

The pan-African developmental bank says the funds, extended under the Bank Group’s Botswana Economic Recovery Support Program, will be used to enact multi-sector reforms that will increase spending efficiency, create jobs and drive inclusive growth.

AFDB says the project has three components: enhancing domestic resource mobilization and mitigating fiscal risks to enhance macroeconomic performance and create fiscal space for spending on social safety nets; supporting private sector-led agriculture and industry to bolster productivity and value addition, and increase job opportunities; and offering business development services to micro and small enterprises to advance social protection and gender equity. 

“The African Development Bank is providing support for reforms to enhance private sector-led agriculture, and transformation of the industrial sector,” said Leila Mokadem, Director General of the Southern Africa Regional Development and Business Delivery Office. 

Meanwhile the World Bank loan money is also expected to be used to accelerate key economic reforms and support the implementation of the country’s Economic Recovery and Transformation Plan (ERTP), designed to strengthen COVID-19 pandemic relief. The New York headquartered bank revealed in June that the loan is the first-ever World Bank budget support operation for Botswana and the first of two planned operations.

“The COVID-19 pandemic has placed a great burden on the country’s economy, its people, and firms. With this operation, the World Bank will support the government’s reforms to ensure social spending reaches the poorest and assists Batswana who are most affected by the Covid-19,” said World Bank Country Director for Eswatini, Botswana, Lesotho, Namibia and South Africa, Marie Francoise Marie-Nelly. 

“This operation will also support reforms to attract private sector investments, contribute to diversification of exports, and increase job opportunities towards a green economy”.

According to the Bretton Woods institution, the operation provides both financial and technical support for government reforms to implement a Single Social Registry and to improve targeting of social spending on the most vulnerable while strengthening systems for future shocks. 

“It will also help strengthen the business environment for increased SME-led job creation and economic diversification through improved access to finance for individuals and small and micro enterprises (SMEs).”

Publicly available information shows that the country’s debt has been on the rise having started 2020 with a P30.4 billion debt before ending the year with P38.6 billion in loans. At the last count, domestic borrowing alone had already jumped from P15 billion to P22 billion. 

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