Botswana ended the first quarter of the year with a gaping deficit, signalling a difficult economic recovery road ahead as more data – which shows the extent of the economic damage caused by coronavirus pandemic – trickles in.
Statistics Botswana’s International Merchandise Trade Statistics for March 2020, which covers trade data of the first three months of this year shows that the country recorded a monthly trade deficit of P1.67 billion in March. The shortfall was slightly lower than P2.2 billion in February and a huge departure from January’s P333.6 million trade surplus.
During the three months trade period, Botswana imported goods and services valued at P16.8 billion, dwarfing the P13.2 billion value of goods exported for the same period. The P3.6 billion deficit is larger than 2019’s first quarter trade deficit of P2.1 billion, sparking fears that 2020’s first start might point to another year where the foreign exchange reserves under pressure as result of a growing import bill over dwindling revenues.
Botswana ended 2019 with a cumulative trade balance deficit of P14.2 billion, the highest since 2012’s trade shortfall of P16.3 billion. The country’s continued growing deficits are reversals of gains made in the five-year period of consecutive trade balance surpluses that started in 2014.
Based on the false start in 2020, the year is tipped to fare worse than 2019 as the Covid-19 pandemic continues to shake economies worldwide. In response to the global pandemic, countries took drastic measures to curtail the spread of the virus, including nation-wide lockdowns which restricted movements of people and affected trade activities.
Botswana’s Finance ministry has since projected a 13 percent contraction in gross domestic product (GDP), making it the largest growth decline in the country’s economic history. In April, as the effects of the coronavirus became more nuanced, the finance minister Dr. Thapelo Matsheka revised the initial budget proposal he unveiled in February, cutting projected revenue for the 2020/21 financial year from P62.4 billion to P48.8 billion.
Matsheka further adjusted the planned P67.6 billion government expenditure to P59.6 billion. During the lockdown that began in April and ended the third week of May, the government supported the economy through combinations of fiscal and monetary policies.
Part of interventions include the P2 billion Covid-19 fund, which is being used to provide wage subsidies and government backed credit collaterals. The government has ploughed deeper into the budget to widen social safety nets, providing food packages to those affected by disruptions in economic activities.
As the country tries to return to some semblance of normalcy following the easing of lockdown rules, a difficult economic recovery lies ahead. According to official data, the government will be spending more than it has in the coming years. The budget deficit for the 2020/21 financial year is now estimated at P10.8 billion, ballooning from the P7.9 billion shortage registered in 2019/20 financial year, which was a slight reduction from 2018/2019’s massive P8.8 billion budget deficit.
The government has been running deficits since 2017/2018, with that year’s shortage recorded at P1.9 billion. Another shortage of P4.4 billion is expected in 2021/22 but will likely be revised too in the coming months.