Botswana is the sixty fifth largest informal economy as a percentage of its total economy in the world, the International Monetary Fund has said. In a recently released working paper titled, “Shadow Economies Around the World: What Did We Learn Over the Last 20 Years?” in which 158 economies were studied, Botswana, with a score of 30.3 percent, was ranked the sixty fifth largest informal economy.
According to the IMF, Botswana’s informal economy which is defined as the non-observed economy grew by 10.4% between 1991 and 2015. The report also indicates that Botswana experienced the lowest informal economy rate in 2014 when it recorded 22.10 percent whilst the highest rate was 35.89 percent.
The Government of Botswana has accepted the growth of the informal economy but still has not found an effective way to measure the informal sector, which without doubt can contribute to the fiscus through paying taxes.
From the report, Sub-Saharan African countries are the highest with average values above 36 percent (both averages over 1991ÔÇô2015). High income countries have the lowest shadow economy and low income countries vice versa. Georgia which topped 64.9 percent is the world’s largest informal economy whilst Switzerland with 7,2 percent was the lowest in the world.
The IMF admitted that shadow economies, which are known by various names around the world, among them hidden economy, grey economy, black economy or lack economy, cash economy or informal economy, were difficult to measure as agents engaged in shadow economy activities try to remain undetected.
The IMF also says the informal economy “includes all economic activities which are hidden from official authorities for monetary, regulatory, and institutional reasons. Monetary reasons include avoiding paying taxes and all social security contributions, regulatory reasons include avoiding governmental bureaucracy or the burden of regulatory framework, while institutional reasons include corruption law, the quality of political institutions and weak rule of law.”