The International Monetary Fund (IMF) has said Botswana’s economic growth will soften this year at the back of pressure on two major production inputs and slowing diamond recovery.
The country’s economy grew faster than expected in 2013 at about 6
percent, owing to the improved performance of the mining sector, but
slowdown in recovery in Botswana’s major exports will affect real GPD
numbers, according to the Washington based Bretton Woods institution.
“Looking ahead, real GDP growth is expected to moderate to 4 1/2 percent in 2014, as the slowdown in diamond recovery and continued problems in electricity production and water supply will likely soften the pace of economic activity,” said the IMF after a recent mission to Botswana.
Water and electricity as the two major inputs are under tremendous
pressure because of poor project implementation and lack of government planning. Electricity supply is currently stable, but it remained a major concern for businesses as most factories closed when Morupule B experienced failures at the beginning of the year.
Equally, water remains a cause for concern as the Gaborone Dam, which
supplies the city and its environs, was at 15.6 percent capacity as of
April ÔÇô which means if there is no rain and the dam does not fill up, it
will dry in the next three months.
However, news dam projects seem to be at full capacity; Letsibogo Dam
stood at 97.72 percent and Dikgatlhong Dam 99.55 percent, but the
problem is taking water to where it is needed most.
The IMF said however, the 2014/15 budget should help to rebuild the
net financial position of the government saying it welcomes the
initiatives that have been put in place to strengthen public financial
management within treasury and improve the quality of the public investment program.
“The budget’s emphasis on improving the performance and finances of parastatals is also well placed. Delivering good outcomes in the implementation of the public investment program would require improving public financial management (PFM), including in the area of project management, monitoring and oversight,” the mission led by Lamin Leigh said.
It warned that returning to an era of strong growth and accelerating
Botswana’s convergence to higher income levels would require a set of
policies to reinvigorate economy-wide productivity including addressing the skills shortage in the economy.
These include improving the quality of public spending, the efficiency
of the tax system and addressing the skill mismatch in the labour market.
“In this regard, the mission commends the government on the skills
development policies announced in the 2014/15 budget which should be
seen as an integral part of a broader set of policy actions that include employment, investment and innovation policies in order to reinforce the links between the educational system and labour market
outcomes,” the mission said.
“The authorities should also continue to improve the country’s
competitiveness, including reducing further the regulatory burden on
firms to create the enabling environment to facilitate structural
transformation of the economy.”
The mission also recommended that macro prudential measures be used to address the continued rapid increase in household indebtedness saying it welcomes steps being taken to strengthen the capacity of the non-bank financial institutions regulatory agency.
“The ongoing diagnostic study on the current credit reporting system
(CRS) in Botswana which was conducted by the authorities to identify
the gaps, and provide recommendations on improving the current credit
reporting system is a step in the right direction. The government’s
emphasis on enhancing greater financial inclusion, while committing to
provide adequate safeguards to preserve the stability of the financial
system, is also welcome”.
The IMF mission visited Gaborone during April 22-May 2 to conduct the
2014 Article IV Consultation discussions with Botswana. The mission’s
work focused on reviewing recent economic developments and prospects and policies to ensure continued macroeconomic stability and growth.
The mission met with Minister of Finance and Development Planning,
Kenneth Matambo; Bank of Botswana Governor, Linah Mohohlo; Permanent Secretary Ministry of Finance and Development Planning Solomon Sekwakwa; senior government officials; development partners; and representatives from the private sector and civil society.