The Government of Botswana is faced with a growing budget deficit that is expected to go beyond previous projections, official figures suggest. The government budget deficit projections for the fiscal year 2015/16 which were made in February by Finance and Development Planning minister Kenneth Matambo were far from the actual figures.
In the latest data projections provided by the central bank ÔÇô Bank of Botswana, the government’s budget deficit is estimated to have reached 4.5 percent of the Gross Domestic (GDP) compared to Matambo’s minus 2.8 percent estimation.
Researchers at Bank of Botswana have found out that due to the lower-than-projected revenue outturn, particularly mineral revenue, the estimated budget deficit was P6.6billion which is larger than the initial projection of P4.2 billion announced by Matambo in February.
Still in February, Matambo said that the revised total expenditure and net lending for 2015/2016 is estimated at P55.96 billion, an increase of P1.81 billion or 3.3 percent from the original budget estimate of P54.15 billion.
“This increase is due to supplementary funding of P423.36 million under recurrent and P1.39 billion for the development budget. As a result, the revised 2015/2016 budget shows a deficit of P4.20 billion or minus 2.8 percent of GDP compared to the original projected surplus of P1.23 billion,” Matambo said in February 2016.
A sustained weakness of the diamond market in the past few years has seen diamond prices softening while output targets have also been trimmed. Sluggish sentiment in the market has seen both De Beers and Botswana’s Okavango Diamond Company (ODC) sales falling by over 20 percent in the first half of 2015.
The government recorded a budget surplus equal to 0.20 percent of GDP in 2015. Available figures shows that the government budget averaged 0.76 percent of GDP from 2004 until 2015, reaching an all time high of 11.20 percent of GDP in 2007 and a record low of -10.70 percent of GDP in 2010.
On the other hand, the BoB data which was recently published along the 2016 midterm review of the monetary policy shows that total government expenditure for the 2015/16 fiscal year grew by 2.8 percent compared to the 2016 budget speech projection of a 10.6 percent increase. Recurrent spending increased by 4.5 percent (11 percent projected), while development spending contracted by 2.3 percent (9.5 percent projected growth).
The BoB data further shows that in the twelve months to June 2016, total government spending is estimated to have increased by 9.2 percent while Development and recurrent expenditure increased by 20.8 percent and 5.5 percent, respectively, in the same period.