A summary of the performance of the Net Financial Position (NFP) of Botswana as reflected in the latest Budget Strategy Paper has painted a worrisome image about the country’s fiscal sustainability.
The strategic document which is prepared on an annual basis and precede the national budget that the country’s NPF ÔÇô as a percentage of the Gross Domestic Product (GDP) deteriorated significantly between 2010/11 and 2012/13 before recovering slightly in 2014/15. Following the slight recovery, Botswana’s NPF has been very low – a trend that technocrats at Finance Ministry say “is worrisome”.
NFP is regarded as one of the key indicators of fiscal sustainability which is measured by the level of government cash balances minus net debt ÔÇô as a percentage of the GDP.
In economic circles, fiscal space is commonly defined as the budgetary room that allows a government to provide resources for public purposes without undermining fiscal sustainability.
Officials at the Finance Ministry said last week that Government Cash balances held with Bank of Botswana have been stable around P30 billion after falling from over P40 billion prior to the 2009 global financial crisis.
“On the other hand, public debt ÔÇô both domestic and external, has also remained modest and within the statutory limit of 40 percent of GDP”, reads part of the Budget Strategy which was presented at the Budget Pitso last week.
Finance Ministry officials who prepared the BSP noted that maintaining sustainable levels of debt in the medium term is part of the implementation of the Medium Term Debt Management Strategy of 2016/17 ÔÇô 2018/19. The strategy, according to BSP has been drawn up to ensure that Botswana does not slide into debt trap, “which can undermine future growth of the economy”.