The Government Investment Account (GIA) has shown some recovery over the past year, reaching P17.8 billion in October 2022 compared to P9.8 billion a year earlier.
The Minister of Finance Peggy Serame stated in the budget speech that it is important to note that part of the GIA is accounted for by Special Funds and Deposit Accounts, which have designated uses or are held on behalf of third parties and hence may not be automatically available for budgetary purposes. She added that low GIA levels limit the extent to which government can draw on its reserves to finance future budget deficits, leaving borrowing as the main financing option.
“Notwithstanding this recovery in the GIA, taking a long-term view of our fiscal position, it is evident that we need to address some worrying trends,” said Serame.
She further stated that back in 2008, government’s net financial assets – broadly speaking equal to accumulated savings minus public debt were equivalent to 40 percent of GDP. She added that by 2021, after many years of budget deficits, net financial assets were equivalent to minus 20 percent of GDP, as the GIA was substantially drawn down and borrowing increased. At the very least we would like to restore government’s net financial assets to positive territory, with savings at least sufficient to balance the debt. She is of the view the view that no effort will therefore be spared to return their fiscal balances to a favourable position.
“Historically Botswana’s debt levels have been relatively low and debt servicing has never been a challenge.
Serame stated that government and government-guaranteed debt is expected to remain below 25 percent of GDP by the end of NDP 11 in March 2023, which is a sustainable level and well below the statutory limit of 40 percent of GDP. She added that however, with limited room to draw down from government’s savings, any further budget deficits will result in increased borrowing. She is of the view that this trend, coupled with rising interest rates, means that they must pay attention to their growing debt service obligations.
“A large share of the budget will focus on investment in infrastructure. In this regard, Ministries are reminded to ensure that projects are awarded to citizen owned companies as well as to reserve constituency community projects for contractors in the immediate locality, so as to distribute the impact of the fiscal stimulus throughout the country,” said Serame.
She spoke of a positive economic outlook for the coming year, and that there are heightened global risks that could have a negative macroeconomic and fiscal impact on their economy. She is of the view that it is therefore critical that they continue to build resilience and maintain the capacity to cushion the economy against potential shocks.
