The government has moved ahead with plans to raise fees and levies across services offered by ministries and departments, as part of efforts by the government to build the P43 billion that will be needed to jumpstart the economy.
Plans to increase user fees for some government services gained traction last year, pressured by the widening budget deficits caused by large expenditures against dwindling revenues. The situation has been made worse by the global coronavirus outbreak, which has rattled resource dependent economies like Botswana, with the country’s diamond exports taking a massive knock, while another key contributor to government revenue, tourism , coming to a standstill due to travel restrictions.
Just this week, the ministry of Land Management, Water and Sanitation Services announced that it has implemented revised fees beginning of September, hiking the costs for some services and introducing charges for previously free services. The ministry of Agricultural Development and Food Security also this week disclosed that cabinet has approved new and revised user fees and service charges, which affect most of the services offered by the ministry. Both ministries cited the Presidential Directive issued this year that urged ministries to raise revenues and cut costs.
The minister of Finance and Economic Development, Thapelo Matsheka, last month presented an altered eleventh National Development Plan (NDP) that incorporated the impact Covid-19 containment measures has had on the country; reduced economic growth and national income, and worsened country’s fiscal and balance of payments positions. Government revenues are projected to be 16 percent lower in the current, 2020/21 financial year than they were when the Mid-Term Review was prepared, and 11 percent lower over the remaining years of NDP 11, which began in 2017 and ends in 2023.
The Mid-Term Review has been updated with the equally ambitious Economic Recovery and Transformation Plan (ERTP), which was unveiled in late June, with efforts aimed at the restoration of economic activity and incomes, facilitate economic growth and the further expansion of productive capacity, accelerate economic transformation and build the resilience of the economy. In April, Matsheka revised his initial February budget, cutting projected revenue for the 2020/21 financial year from P62.4 billion to P48.8 billion. The planned P67.6 billion government expenditure was reduced to P59.6 billion.
According to the finance ministry data, the projected budget deficits are expected to grow in size. The budget shortfall for the 2020/21 is now estimated to be P10.8 billion, ballooning from the P7.9 billion deficit registered in 2019/20 financial year, which was a slight reduction from 2018/2019’s massive P8.8 billion budget shortage. The government has been running budget deficits since 2017/2018, with that year’s deficit recorded at P1.9 billion. Another shortfall of more than P4.4 billion is expected in 2021/22 but will likely be revised too in the coming months.
To raise the billions of pula needed for the economic recovery plan, the government economic advisors have proposed drawing money from the government’s portion of the foreign reserves, taking on more external debts and increasing domestic borrowing, while also disposing some government properties, including privatisation of some institutions. The government also plans to raise revenue generation through increased taxes and other levy charges.
In addition to raising user charges and fees for public services, other measures include raising value added tax (VAT) from 12 percent to 14 percent in two years, increasing withholding tax rates, introduction of carbon taxes, raising the fuel tax and other levies. The electricity and water tariffs are to be increased as well in three to five years.
The government is also considering a cost sharing and cost recovery model which will see the public being charged fees for education and health provisions, services which are largely offered for free by the government. Furthermore, the government is looking into cutting back on expenditure by reducing subsidies to the agricultural sector and cutting on subventions to parastatals.