Botswana’s Treasury has made a downward revision to the earlier projections on the country’s mineral revenue.
Through the 2021 Budget Strategy Paper (BSP), the Ministry of Finance and Economic Development says the outbreak of COVID-19 earlier this year and the associated impacts, have resulted in downward revisions in the initial economic indicators estimates.
The latest BSP, published this past week stated that the country’s total Revenues and Grants have been revised down to P58.77 billion in 2021/22, which is P9.22 billion or around 13.5 percent, lower than initial expectations.
According to the authors of the BSP, the downward revisions reflect an anticipated deterioration in tax receipts from both mineral and non-mineral sources.
“Specifically, mineral revenues are forecast to be 27.3 percent lower than the previously estimated figure of P21.60 billion, reflecting an anticipated slow recovery in the global economy in general and the international diamond market in particular”, reads part of the BSP.
Lower demand in the United States and China, the major markets for polished diamonds, is anticipated in the medium term, due to uncertainty in these markets and corresponding risk sentiments. Combined with the current high levels of inventory in the diamond value chain, this is expected to lead to lower diamond production in Botswana than was earlier anticipated, and hence lower fiscal revenues from mining.
Between July and September 2020, diamond production at De Beers owned mines saw rough diamond production decreasing by 4 percent to 7.2 million carats, driven by planned reductions in production to reflect the lower demand for rough diamonds due to the Covid-19 pandemic.
In October De Beers kept its production guidance unchanged at 25 to 27 million carats, subject to continuous review based on the disruptions related to Covid-19 as well as the timing and scale of the recovery in demand.