Tuesday, December 7, 2021

Failure to save undermines Botswana’s long-term development outlook ÔÇô World Bank

A World Bank publication on recent economic and social developments and prospects in the Southern African Customs Union (SACU) zone which is released every six months says Botswana’s failure to save for good times lessens public finances accessible for long term investments in infrastructure, health or education.

The report also states that failure to save reduces the accessibility of fiscal buffers which are required to stimulate the domestic economy in subdued times. From their assessment, the unpreparedness to positive shocks often result in the government spending the windfall in current expenditures such as wages, instead of public investment projects which take several years to plan and execute.

Recently SACU said it plans to establish a Stabilisation Fund which will counterbalance the cyclical fluctuation of the customs receipts which are anticipated to dwindle by between 8 and 10 percent in the 2018/19 financial year. The SACU Stabilisation Fund will be essential to compensate for the fluctuation of SACU receipts throughout the phases where SACU revenue to members states nose dives.

In a subtle warning to Botswana, Lesotho, Namibia, South Africa and Swaziland, which share revenue based on an agreed formula, the World Bank says these countries struggle with good governance of public financial resources in good times than in bad times. The report also states that while ‘stimulus packages’ can be rewarding politically, countries must be cautious and save especially during the commodity boom.

Although the stabilisation fund is a good plan, some problems which are likely to hinder its progress are the ways countries access the fund based on their risk exposure and the governance and management structure of the fund.

This Friday 29th, Botswana will host the 6th SACU Heads of State Summit in Gaborone where the stabilisation fund will also be part of the agenda.

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