Thursday, July 18, 2024

Botswana government should be more on the true state of the economy

The cost of living crisis continues to hurt too many people in the country. Of course  it is no longer a topical issue in the public media. But that does not in any way mean that people are finding it any easier to get by. For many people the situation has become even  more unbearable. People have lost their houses. Those that still have their houses, mortgage costs have skyrocketed. School fees and fuel costs have reached a crisis level. But because the public education system has literally collapsed, parents do not have much of a choice. There are just many red flags.

Debt is a heavy burden for many households. Persistent Interest Rate hikes have pushed mortgage payers to dangerous places. Inflation has been rigidly too high for far too long. Inflationary pressures have been unbearable, not for those officials tasked with monetary policy, but for the poor who have to make ends meet. And as the poor people will attest, it has been food inflation that has been most hurtful. It would seem like the government is not awake to all these ills especially the net effect on people, a majority of who are out of work or underpaid. Covid has left the economy badly buffeted, hiking unemployment to dangerously high levels. As a general rule, parastatals are on a state of collapse.

Some of them have become insolvent. Botswana government needs to assist people to overcome this economic morass. But before such assistance comes through, every government decision needs to be data driven. And every decision so reached should be taken and be communicated transparent. To start with economic data statistics coming through from the Statistics office are too dependent on events at government. Secondly, these statistics are not frequent enough. Like for example we have no idea of how employment levels are doping on a month by month basis. This calls into question the integrity of the statistics themselves. It has not been lost to us that in all these economic difficulties, banks continue to  make very high prices.

The biggest reason for those profits has got nothing to do with efficiency. It is surprising that as monetary policy has been tightening, banks have themselves been making money. Good business dictates that net income from interest should be coming down. Yet what we have been witnessing across the board has been a dramatic rise in net interest income. It is difficult to classify what the banks are doing if it is not criminal. Interest rate rises are always immediately passed on to borrowers. Yet they are only marginally, if ever passed on to savers. Bank of Botswana should look at this carefully. We are in no way suggesting that the benefit of rate increases passed to savers should match the rate rise.

There are costs that banks incur for providing services, but the business model that runs across these banks tends to reward inefficiency in our banks. It cannot be morally right that banks continue to make so much money on the back of increasing misery of their customers. Worse, some of the bank managers have been increasing their compensations to obscene levels. We do not have to teach bank managers that inflation is to the poor a real cost because it affects them the most. Under the circumstances, the situation for the poor is compounded if they have some savings in the banks because as it is those savings will not be benefiting from the  tightening monetary policy. This has a net impact on the cost of living crisis. And as is so often the case, it is the poorest that bear the heaviest burden.


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