Thursday, October 28, 2021

Botswana’s total external debt volumes up

The latest fiscal figures have shown that in 2016, Botswana reversed a positive trend that started in 2013 when its total external debt began decreasing. 

Available official figures show the highest record of external debt recorded by Botswana in the past 12 years was in 2012 when it reached US$4,251 million. Economic pundits maintain that the development was a culmination of a tough post-recession period ÔÇô when the recession hit hard in 2009, the debt rose from $1544 million in 2008 to $3262 million. It continued on an upward trajectory until 2013 when it decreased to $4163 million, $3870 million in 2014 and $2687 million in 2015. Last year, however, it rose to $3656 million. 

At the same time, the official figures shows that the 2016 debt represents 24.3 percent as a percent of GDP and is 5.7 percent higher than the 2015 level. Last year’s debt service ratio represented 9.9 percent of the country’s total exports.

At the same time, the country’s GDP has decreased from its 2014 levels when it was $16, 251 million, having risen from $14, 902 million the previous year. In 2015 it dropped to $14, 410 million, farther down to $12, 495 million in 2016 and this year’s is $11, 508 million.

With the Ministry of Finance and Economic Development having forecast a deficit, such reversal may continue into the foreseeable future.

This week, one of the legislatures with economic insights, Ndaba Gaolathe, faulted the Botswana government for under-utilising its massive borrowing power that it could use to solve some of the pressing economic problems that the country faces.

“Botswana has substantial capital resources, including pension resources which are the size of our entire formal banking sector. The government also has significant borrowing power which, to date, has not been put to bear notwithstanding that this may be viewed positively as a sign of prudence,” the Gaborone Bonnington South MP, told Sunday Standard.

An upper middle-income country with vast amounts of foreign reserves and underinvested national pension resources, Botswana has, over the years, demonstrated very little appetite for borrowing. When the global financial crisis hit, diamond prices plummeted and the country’s finances were badly affected. In 2010, the government did, for the first time in 17 years, borrow a large sum (P10.5 billion) for budgetary support. The loan covered the larger part of the P13.4 billion deficit the government had incurred in its 2009/10 national budget, with the remainder of the deficit being covered by a P2.2 billion loan that the country got from the World Bank through the African Development Bank’s Development Policy lending window.

The latter is a fast-disbursing facility intended to assist countries in economic crisis. For the AfDB, this was a development so welcome that its former president, Donald Kaberuka, came to Gaborone for the signing ceremony. In its country strategy paper for Botswana which covers 2015 to 2019, AfDB says that its relationship with the country was particularly boosted by the provision of the general budget loan in 2010 and that the loan helped raise the bank’s profile as a key development partner in Botswana. 

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