Government warned on Friday that financial year 2011/ 12 will end days of wastage as it will focus on sustainable projects as Botswana moves to have a balanced budget in two years.
Kenneth Matambo, minister of Finance and Development Planning, said resources will be allocated to projects that are important to the livelihood of the country, including investing in health, power, water and education.
“It will be important for stakeholders to recognise that resources are scarce and that allocation of resources require priority. Whatever we do should be sustainable,” said Matambo.
Government is putting priority in completing development plans, which means the borrowing spree by treasury might continue in the next financial year.
Botswana borrowed heavily from the domestic capital markets and external lenders since 2008 as mineral revenues dwindled, leading to fears that the country might experience debt crisis as is the case with Greece.
The Budget Strategy Paper, which will guide the 2011/ 12 budget, has revealed that the diamond mining activity, which is the mainstay of the economy, is improving and could head for full recovery in 2012/ 13.
During recession, foreign exchange reserves declined with total revenues and grants falling by 8.8 percent from P30.455 billion in 2008/09 to P27.782 billion during the 2009/10 financial year.
However, government maintained its expenditure to complete such projects as dams, airports and roads that were already in progress.
“For the next budget, we must put priority in completing development plans,” said Matambo.
The Budget Strategy Paper sees GDP growing at 7.9 percent in 2010, but it is wary that public debt could get out of control.
“The budget strategy, given financial constraints is to allow the recurrent budget to sustain access and quality of public services and to address the large recurrent needs of the recently completed development projects,” the paper stated.
The paper highlighted that, going forward, this implies a combination of fiscal and monetary policy initiatives, which include limiting government domestic and foreign borrowing at 40 percent of GDP (20 percent internal and 20 percent external) to avoid being caught in a debt trap.
Although Botswana has not yet reached the global borrowing benchmarks as is the case with Greece, economists have warned that if the levels of borrowing are continued, there is a risk of debt trap.
“I do not think it is at the level of international standards. Botswana is not at a risk of debt crisis at the moment. It is only that it is bigger than what we are used to in the past, but smaller by world standards,” economist Dr Keith Jefferis said earlier this year.
Charles Tibone, the assistant minister at the Finance ministry, told parliament last December that total indebtedness, including external, domestic debt and government guarantees, currently stands at over P20. 4 billion.
The minister assured the country that Botswana has not over borrowed.
Botswana government has borrowed US$1.5 billion as budget support loan from African Development Bank (AfDB), World Bank, and domestically to prevent the economy from going into abyss.
Botswana had not sort support for the past 17 years, it has been revealed.
The government has also guaranteed other loans like the one for Morupule B expansion project where Botswana Power Corporation (BPC) has borrowed US $125 million or P5 billion from Stanbic Bank.
The 2011/12 budget lays the foundation for achieving a balance budget by 2012/13, which means there are likely to be sacrifices.
“The development budget must shrink as ongoing projects are completed and we must select only high return projects with the remaining funds,” said the Budget Strategy Paper.
“The recurrent budget must ensure that essential services are delivered while scaling back on the non essential services. The recurrent budget must also ensure that existing infrastructure is adequately maintained and operated.”
IMF has advised government to halt development projects that have not taken off, scrap scarce skills and broaden tax base by removing tax incentives given to companies. It also suggested that zero rated items under Value Added Tax (VAT) should be taxed.
The international organisation also suggested that government should reduce subsidies and stop employing civil servants. Government wage bill is P700 million/ month.
