Friday, January 22, 2021

Government’s rate of borrowing calls for a public debate

There is no doubt that as a country we are going through a rough patch.
Most of the economic difficulties we are experiencing as a nation are not of our making.
They are a part of the global crisis which started in the West.

As a country, we rely very heavily on diamonds.

Because the biggest market for our diamonds is the United States, when America runs into trouble, as it did over the last two years, Botswana inevitably feels the pinch.

With such a skewed vulnerability to events that happen beyond our borders, it is extremely important that whatever decisions we make that are within our powers are the right ones.
The impact the global economic crisis had on Botswana was a drop in foreign reserves.
Thus Government did not have to explain or justify itself when it borrowed something like P1.5 billion to help finance the budget shortfall.

It was clear to every Motswana that with the diamond market at its lowest in a generation, the only alternative Government had (other than fast-tracking a meltdown by canceling projects) was to go to the international market and ask for credit.

The hope was that such borrowing was temporary and done and done under the most austere of circumstances.

But it would seem like the appetite for borrowing is not about to subside.
If anything it is growing at an even faster pace.

Just last week, the Minister of Finance, Kenneth Matambo was receiving close to a billion from the World Bank, not as a gift ÔÇô but another loan.

This latest tranche is over and above what Botswana already owes the African Development Bank.
The issue here is not whether or not the money is meant for critical projects that cannot wait.
Rather, it is about the long term implications excessive borrowing is likely to have on Botswana.
At the moment, it is very easy for Botswana to access loans because of the country’s excellent credit ratings, not to mention a very good balance sheet.
The irony though is this is a double edged sword.

Excessive borrowing will in the long-term undermine the very same factors that are inspiring it today.

If we continue borrowing it will not be long before we, as a country, are classified as not creditworthy or high risk by the same institutions that are today gleefully extending us loans.
We understand very well that Government has the mandate to make decisions on behalf of the people.
We have no doubt that Government means well in what it is going and that they believe what they are doing is in the best interest of the country.

But given the long term implications these borrowings have on the entire country, it is high time there was a sincere and honest public debate on the merits and demerits of it all.
At the moment it would seem like our appetite for debt is premised on the notion that diamond prices will soon recover and start footing the repayment bills. It may well be so.
But still there is need for a public debate on the matter, given the pitfalls that we fall into as a nation.

This is not to question the government’s motives, but rather their judgment.
We hope by allowing for a debate the Government will have themselves covered.

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