The Botswana government which has spent P4 billion on the COVID-19 Economic Stabilisation Plan, a short term plan developed and implemented by government during a tough lockdown that ran from April to June, says it will need ten times more to turn the economy around.
The minister of Finance and Economic Development, Thapelo Matsheka, has presented an altered eleventh National Development Plan (NDP) that reflects the impact Covid-19 containment measures have had on the country: reduced economic growth and national income, and worsened country’s fiscal and balance of payments positions. Government revenues are projected to be 16 percent lower in the current, 2020/21 financial year than they were when the Mid-Term Review was prepared, and 11 percent lower over the remaining years of NDP 11, which began in 2017 and ends in 2023.
The Mid-Term Review has been updated with the equally ambitious Economic Recovery and Transformation Plan (ERTP), which was unveiled in late June, with efforts aimed at the restoration of economic activity and incomes, facilitate economic growth and the further expansion of productive capacity, accelerate economic transformation and build the resilience of the economy.
“The aim is to promote implementation of the pre-COVID-19 development and transformation agenda, while incorporating the lessons learnt and seizing new opportunities to pursue the path towards high-income status by 2036,” Matsheka said in parliament when presenting the Mid -Term review paper.
NDP 11, as amended during the Mid-Term Review and with the addition of the ERTP, includes a large number of development projects, which have pushed the public expenditure requirements for the remainder of NDP 11 higher. The minister added that the various measures introduced to respond to the impact of COVID-19 through an economic stimulus package amounts to some P18.5 billion, or almost 10% of GDP, an amount that has been chosen to be sufficient to provide a significant fiscal stimulus to counter the impact of COVID-19 on the economy.
But with falling revenues, and widening budget deficits, Matsheka said the financing requirements have to be addressed upfront. The total financing requirement projected for the second half of NDP 11 amounts to P43 billion.
“To address this, some money will have to be raised through a combination of increased domestic revenues such as taxes and levies, and borrowing,” the minister said, and added that the government has little scope to draw down further on the Government Investment Account – the government’s portion of the foreign exchange reserves – as this needs to be preserved as a financial buffer. The GIA account has been declining in recent months as government pulled emergency funds from the buffers.
“Additional borrowing will be sourced from the domestic capital market, including pension funds, and from the banks. It will also be necessary to borrow from external sources. Fortunately, due to prudent financial management, the Government starts off with relatively low debt, and even with the additional borrowing the debt level will remain sustainable and well within the statutory limits on public debt,” Matsheka added.