Botswana’s real Gross Domestic Product (GDP) increased by 5.9 percent during the last quarter of 2022, as opposed to an increase of 6.0 percent in the same quarter of 2021, official figures released by Statistics Botswana this past week shows.
The state owned data agency says the growth was attributed to real value added by Water & Electricity, Diamond Traders and Mining industries which rose by 74.1, 24.4 and 10.1 percent respectively.
“All other industries recorded positive growths of more than 1.6 percent except Agriculture at 0.6 percent”, reads part of the GDP report for quarter four of 2022 (Q4:2022).
On annual basis, the real GDP expanded by 5.8 percent in 2022 compared to a rise of 11.9 percent in 2021. The increase in annual real GDP has also been attributed to the growth in the Water & Electricity, Diamond Traders, Manufacturing and Mining & Quarrying sectors which recorded an increase in real value added by 48.6, 17.6, 8.2 and 7.5 percent respectively.
As the economy continued to grow , propelled by strong diamond sales, the government’s finances have also improved. Data shared by the Bank of Botswana in February 2023 shows that total foreign reserves as of November 2022 was P59.5 billion, lower than the P60.7 billion in October, but higher than the P57.6 billion in November 2021. The central bank manages foreign exchange reserves through two portfolios; the Liquidity Portfolio and the long-term investment portfolio know as Pula Fund.
With the rapid decline in the sovereign wealth fund, the Finance ministry embarked on fiscal sustainability to improve revenue collection and contain expenditure in efforts to return to budget surpluses – using the extra cash to shore up the GIA and maintain it as a fiscal buffer against future shocks.
The country’s Finance minister Peggy Serame has reiterated that there is urgent need to contain expenditures in order to manage the fiscal deficit, which is the main driver of the declining GIA. The government has been plagued by budget deficits since 2017, adding up to nearly P50 billion in the past six years.
Still in February Serame’s budget showed that the national budget will remain on the red even going into the Transitional National Development Plan (TNDP).
The latest budget shows that the country’s total revenue and grants for the financial year 2023/2024 are estimated at seventy-nine billion, seven hundred and ninety million Pula (P79.79 billion), compared to total expenditure and net lending of eighty-seven billion, three hundred and eighty million Pula (P87.38 billion).
This means Botswana will see a budget deficit at 3.06 percent of the gross domestic product (GDP) for the year 2023/24, compared with 2.1 percent for 2022/23.
Serame admitted in February 2023 that with years of growing budget deficits even prior to Covid-19 and the European war, Botswana’s fiscal space has become increasingly constrained. By reducing the public sector wage bill as a share of overall spending and other cost containment measures, such as rationalising State Owned Enterprises (SOEs), Botswana forecast to achieve a balanced budget during the 2024/25 financial year.
Still in February Serame said that the 2023/24 budget deficit will be financed through a combination of financing options which includes issuance of domestic Government securities, in the form of bonds and Treasury Bills to the tune P3 billion. Serame said another option will be net external financing, from official multilateral and bilateral lenders which is projected at around two billion Pula.
“As a result, a total of two billion, 34 two hundred million Pula (P2.20 billion) is expected to be drawn from the Government Investment Account”, Serame said when delivering her second budget speech earlier this year.
