Although economic planners at the government enclave have projected a three year extended government budget deficit, early indications are that President Khama’s new cabinet may stretch the budget crunch beyond three years.
A Ministerial Offices Act (No.4) of 2016 which commenced mid this month increased the number of offices of Minister and Assistant Minister to eighteen (18) and ten (10) respectively. Through the same Act, on Wednesday Khama reorganised and re-designated government portfolio Ministries, a move that is likely to push the government budget beyond the projected deficit of P6.8 billion.
The government Budget Strategy Paper (BSP) ÔÇô a fiscal update document prepared by the Ministry of Finance and Development Planning in mid September forecasted a prolonged budget deficit that will last at least the next three financial years ÔÇô 2017/18, 2018/19 and 2019/2020 respectively.
Based on the Medium Term Fiscal Framework, the 2017/2018 financial year projections register a budget deficit of P6.8 billion or -4.1 percent of GDP, due to the continued sluggish growth in revenues, and increased expenditure from the implementation of ESP. The paper further shows that financial years 2018/19, 2019/2020 will record -4.2 and -2.2 percent respectively.
The same paper further details a breakdown of Ministerial/Departmental Development Budget allocations for the financial years 2015/16 to 2017/18.
The budget allocations which has been presented as percentages of the total development budget only take into account the traditional 16 ministries and does not mention the newly created ministries. Apart from an added expenditure of the two new ministries, the government has also increased the number of junior ministers ÔÇô a move that is also likely to push up government expenditure. The budget paper and Khama’s announcement of the reorganised and re-designated government portfolio Ministries is separated by less than three weeks. This has forced some observers to conclude that the Office of the President and the Ministry of Finance and Development Planning (now Ministry of Finance and Economic Planning) did not consult on key economic matters.
Amongst other things, the Office of the President’s flagship programme, the Economic Stimulus Programme (ESP) has also been listed amongst some of the factors that will lead to a prolonged budget deficit.
Mid this month, the Deputy Permanent Secretary in the Ministry of Finance and Development Planning (MFDP) Kelapile Ndobano admitted at the Budget Pitso in Gaborone that the implementation of ESP is one of the factors that will delay the balancing of the government budget.
In a presentation made to captains of the industry Ndobano noted, “due to continued weak global economic recovery, and the implementation of the Economic Stimulus Programme, budget deficits are projected in the next three financial years”.
The Economic Stimulus Programme (ESP) was adopted by government in September 2015 to promote growth, economic diversification and employment creation. Ndobano further said that despite reports and signs that the government budget will be on the red for the next three financial years; the government is still committed to maintain fiscal sustainability in the medium term.
As a result, Ndobano said at the Budget Pitso government will find ways to trim the planned expenditure or expand the revenue base. “The additional measures to raise domestic revenue or rationalise the planned expenditure during NDP 11 will be considered, if necessary, to maintain fiscal sustainability,” Ndobano said.
Meanwhile the government has since cut its 2016 economic growth estimate to 3.5 percent from an earlier projection of 4.2 percent. The domestic economy contracted by 0.3 percent in 2015, compared to the growth of 3.2 percent registered in 2014.