Saturday, January 23, 2021

Gov’t should be careful not to risk the still fragile economic recovery

There are signs that Botswana’s economy is getting back on the rails, thanks to the United States recovery where people are beginning to buy our diamonds again.

While we should be grateful that at long last we seem to be emerging from the deep slump, the truth of the matter is that it is still too early to celebrate.

The road ahead is long and fraught with many pitfalls.

There are going to be many casualties, with many businesses closing down and people losing their homes before it is confirmed that Botswana is out of danger.
Even then, indications are that whatever recovery comes, Botswana will never reach the heights of its past glory days when money was not an issue.

As a country, we are over borrowed. The economy is running on a heavy debt which is made all the worse by the budget deficit we have had to finance by borrowing from outside.
Our foreign reserves are no longer as impressive as they used to be. Indications are that for the short to medium terms, the shape of the reserves will deteriorate.

Worse, many infrastructural projects are lagging behind ÔÇô with many having been postponed, deferred or cancelled.

And here we are talking about crucial projects, for many of which there will come a time in the future when they will have to be implemented, and when that happens the costs of implementing them, which are fast rising, will put a fresh strain on our public finances.

With such a scenario, it is only a matter of time before the excellent credit ratings that have allowed us to access international credit deteriorate to unfavourable levels.

And when that happens, as a country, we will be faced with a credit crisis, coming out of which will require a painful set of austerity measures. While we hope we will never reach those lows, the signs are that at least for now we are still skating on thin ice.

If government is not careful, by way of reducing its propensity to borrow, it will not be long before credit agencies classify Botswana as a high risk – junk that is not worthy of being extended any credit.

One can only hope that lessons have been learnt. And that going forward we will be more steadfast in our national efforts to diversify the economy and reduce our over-reliance on just one commodity.
Another lesson that the Botswana Government should learn is to desist from relying on the opinion of just a few favoured economists while sidelining everybody else.

The reason why we are today in this economic mess is largely a result of listening to a few blue-eyed boys, who ahead of the crisis, said Botswana was well positioned to weather the storm.
These are the same people who against all evidence insisted that Botswana was well cushioned.
This despite a groundswell of opinion from other experts who pointed out in vain that there was no way Botswana could survive unscathed when countries like the United States and Japan, who are the buyers of Botswana diamonds, were themselves going through a rough patch.

It is a matter of record that the Government of Botswana chose to listen to its favoured economists.
The rest is history.

We all paid the price as we were caught napping and had to close the mines for long periods because nobody came to buy our diamonds.

We hope that in the face of what looks like a light at the end of the tunnel, government will exercise caution and not be misled into risking our recovery by the same people who put us into the appalling depths from which we are still struggling to emerge.


Read this week's paper