Finance and Economic Development minister Dr. Thapelo Matsheka was back in parliament this week requesting for additional funds barely six months after the national budget was approved and later amended as Covid-19 pandemic wrecked the country’s main revenue earners.
Matsheka on the last day of the August session of parliament requested legislators to approve nearly P4 billion in supplementary budget to the one he brought before parliament twice. 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.
The projected budget deficit was pegged at 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. With the latest change to the budget through supplementary requests, the budget deficit from the current 2020/21 budget year that began in March will jump from P10.8 billion to nearly P15 billion, Matsheka told legislators on Friday.
The government has been running budget deficits since 2017/2018, with that year’s deficit recorded at P1.9 billion. The government’s cumulative budget deficits in the last three years is hovering neat P20 billion, nearly 10 percent of the country’s nominal gross domestic product of almost P200 billion. Besides the projected P15 billion budget outrun in the current financial year, another shortfall of more than P4.4 billion is expected in 2021/22 but will likely be revised too in the coming months.
Matsheka has also presented an altered eleventh National Development Plan (NDP) that reflects the impact Covid-19 containment measures have had on the country, negatively impacting its economic growth and national income, and worsening the 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, facilitating economic growth and expanding productive capacity, accelerating economic transformation and building the resilience of the economy.
To raise the billions of pula needed for the economic recovery plan, the government economic advisors have warned against drawing money from the dwindling government’s portion of the foreign reserves, and suggested that government takes more on debts, 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.
But with falling revenues, and widening budget deficits, the former university of Botswana economics lecturer said financing requirements have to be addressed upfront. The total financing requirement projected for the second half of NDP 11 amounts to P43 billion. Matsheka outlined that the various measures introduced to respond to the impact of COVID-19 through an economic stimulus package amounts to some P18.5 billion, nearly ten percent of GDP, an amount seen to be sufficient to provide a significant fiscal stimulus to counter the impact of COVID-19 on the economy, the minister said. More than P20 billion of the P43 billion will go towards financing the budget deficits, revealing a worrying problem where the country is spending more than it is receiving.
The latest request by Matsheka for the P3.7 billion additional funds comes shortly after he successfully sought authorisation from the lawmakers to increase the bond issuance program from P15 billion to P30 billion, enabling the country to borrow more money locally and the bond programme will form part of the capital raising required for the P43 billion that will fund ERTP and NDP11 in the next three years.
Botswana’s total public debt limit is capped at 40 percent of GDP; 20 percent which is domestic borrowing and 20 percent external loans. The country’s total debts amount to P39 billion, where P30 .6 billion in government debt split between P15 billion in domestic loans and P15.5 billion in external loans. The remainder is the P8.6 billion government guaranteed loans, mostly taken for the state struggling enterprises.