Wednesday, June 12, 2024

Gov’t likely to shelve development projects due to new Fiscal rule

A new fiscal rule that commits government to commit fixed proportion of mineral revenue to financial savings could result in less money being allocated to development projects, leading economists in the country have warned.

According to the government budget strategy paper for the 2014/15 financial year, a proportion of up to 40 percent has been proposed as the ratio at which Botswana’s mineral revenue might be diverted towards financial savings.

In his study of the government’s proposed changes to the fiscal policy, Keith Jefferies and his lieutenants at economic consultancy firm, Econsult, Bogolo Kenewendo and Thabelo Nemaorani indicate that although the Fiscal Rule is good, in principle, its implications need to be fully understood.

“In particular the government will need to run large budget surpluses to finance the proposed savings. There also need to be hard and fast rules regarding drawdowns ÔÇô the circumstances and conditions under which the accumulated savings be accessed”, Econsult economists said.

The Econsult economic review paper further states that some projects that have been suggested for in NDP11 will not pass the test as result of the government’s intention to screen developments projects based on economic returns.

“If this commitment is adhered to ÔÇô as it should be – some of the projects that are being called for in NDP11 will not pass the test. With the new Fiscal Rule in place, the focus will shift towards saving rather than spending, and as a result there will be less money rather than more for development projects”, Jefferies and his team insisted.

The Budget Strategy Paper for 2015/ 16 prepared by the Ministry of Finance and Development Planning states that ‘as part of the solution to the problem of poor project implementation’; priority will be given to ‘prioritised’ project monitoring and evaluation as a critical success factor.

“To this end, beginning financial year 2015/16 will see a rigorous monitoring and evaluation of projects reported in each financial year instead of being reported during NDP mid-term reviews,” stated the paper.

“The objective is to continually assess the implementation progress of projects, by taking stock of progress made, constraints and challenges encountered in each financial year, with a view to inform mid-term reviews,” the paper added.

According to the Finance ministry, enforcing such strict monitoring and evaluation system at policy and appraisal level will ensure value for money in the implementation of projects and programmes.

Sunday Standard has been informed that the National Strategy Office has been tasked to develop and implement a National Monitoring and Monitoring System for Botswana with the office and ministry facilitating measurement and reporting on the results.

The paper also raised concerns of the need to provide for adequate maintenance of existing infrastructure to ensure its productivity and durability.

Jefferies and his team point out in their economic review that in the past, Botswana made commitment to invest mineral revenues in various forms of assets, but financial savings have always been a residual effect.

“Partly as a result of this, the financial assets accumulated by government over many years were relatively small and quickly depleted during and after the global financial crisis.”


Read this week's paper