Wednesday, July 6, 2022

Defence budget increased as Matambo unveils a P2.8 billion budget cut

Although the Minister of Finance and Development Planning, Kenneth Matambo, in his bid to balance the budget, will on Wednesday unveil a P2.8 billion budget cut in his 2012 Budget Speech, the ministry of defence will be among a few who will see their budget increased.

Amid a looming recession, the country’s development budget will be squeezed downwards to P10 billion in the coming financial year from P11.3 billion in the previous year (2011/12).

The budget cut is not, however, spread across all the ministries and government departments.
According to the tabled Draft 2012/13 Estimates of Expenditure from the Consolidated & Development Funds, the estimated expenditure under the Consolidated Fund will drop from the authorized P46.1 billion for 2011/12 to an estimated P43.3 billion in 2012/13.

The estimated development budget for 2012/13 is P10 billion against the revised P11.3 billion figure for 2011/12.

Of note is also the increased statutory expenditure estimated to go up to P5.5 billion in 2012/12 compared with the authorized P4.6 billion in the current financial year, which closes at the end of March.

Appropriations from revenue is also expected to decline in the coming financial year to P9.3 billion from P13.1 billion in 2011/12.

While there is an overall budget decline, some ministries will continue to get increases, especially the Ministry of Defence, Justice and Security whose budget for 2012/13 will go up by about P300 million from the P3.6 billion in 2011/12 to P3.9 billion in 2012/13.

Other ministries that will get substantial increases include the Ministry of Works and Transport whose budget zooms to P4.2 billion in 2012/13 compared with P3.7 billion in the previous year and the Ministry of Health with a rise to P4.1 billion in 2012/13 from P3.7 billion as well as the Ministry of Education and Skills Development.

Some economic commentators and legislators are not amused with budget cut.
Tati East Member of Parliament, Samson Guma, said the budget cut is to be expected given that the major projects that government had embarked on previously were nearing completion.

“At the commencement of the projects, a lot of funds were needed. However, most of the projects are nearing completion and therefore do not require additional funding. Take for instance the Morupule B power project, Dikgathong dam and many others which are almost complete. Of course the cut does not mean you do not need a huge development budget for other priority projects. For instance, the connecting pipeline from Dikgathong dam into the main North-South Water Carrier Pipeline is one such priority that needs substantial funding,” said Guma.

As for the recurrent expenditure, he said it would be governed by the estimated streams of revenue, which are likely to be on the decline, adding that if expected revenues are high, government would have the luxury of embarking on new priority projects.

Guma, however, warned against further borrowing saying it would impact on future growth prospects as the country would be faced with a huge debt requiring substantial repayments.
He said there is need to balance the budget and maintain an appropriate match between revenue and expenditure levels.

In conclusion, he said looking at the projects that government had initiated and prioritized for implementation, with or without the recession, Botswana would still have incurred a deficit upon the execution of the huge projects.

An independent economist and managing director of Econsult, Dr Keith Jefferis, said it should be noted that the Minister of Finance indicated the government’s desire to balance the budget by 2012/13 and as such it was imperative to cut the budget in order to achieve the balance.
“When the 2011 budget was presented, it predicted a balanced budget for 2012/13. That involved a substantial cut in budget spending. So the current cut is not coming as a surprise at all,” said Jefferis.

He said what is puzzling is that the budget cut is much lower than his predictions.
“A big cut has long been projected. I had projected a budget cut of about P4.3 billion. We still need to cut the budget in order to balance it. At P2.8 billion the cut is not severe but it will impact on development spending,” said Jefferis.

He explained that the cut will have a small negative effect on economic growth but is unavoidable given the imperative to balance the budget in order to maintain credibility, especially with the credit rating agencies.

“If we do not manage to control spending, our credibility will be affected and we may lose our credit rating. It is important for us to achieve a balanced budget for the long term,” said Jefferis.

He said contrary to perceptions of a looming recession, the truth of the matter is that the global economy is on a slow down but has not yet reached recession levels and that would only happen if the Euro zone banking system collapsed.

Jefferis acknowledged that the global economic slowdown would affect the Botswana economy as commodity prices weaken.


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