Tuesday, August 9, 2022

Minister of Finance Serame has to act on Cost of living crisis

This is simply not where the Minister of Finance Peggy Serame would have liked to be.

The situation for her has become too unenviable.

This week it was announced that inflation had risen to 12.7 percent for June, up from 11.9 percent for May.

This is very significant, not only in scale but also in what implications it holds.

This is unlikely to be the last increase we are seeing.

Before the end of the year there is likely to be several others.

The latest inflation figures come in the backdrop of a cost of living crisis already getting out of control.

The figures will make a bad situation worse.

After the release of latest inflation figures, the monetary policy authority, the Bank of Botswana is likely to act in kind.

But as some observers have been pointing out, the Bank of Botswana is way behind the curve.

The Bank is way behind other central banks in raising Bank Rates.

There will be ramifications for it down the line.

At the moment the best it can do is to react as Statistics Botswana churns out the figures on a monthly basis.

But truth be told, the Bank is already at the end of the road.

There are not many tools left in the tool kit for Bank of Botswana.

This is proving perilous for many households.

There is need for intervention by government.

This intervention if and when it happens should be temporary but effective and targeted.

It should not be one way of financing the already rich as was the case with the Covid-19 relief packages that were so badly abused, including by business.

Such intervention should be within the established realms of Botswana government’s abilities and prudence.

Anything beyond that would backfire and come to haunt public finances.

There is need to safeguard the poorest and the most vulnerable.

One way to do that would be to put cash directly into their pockets.

But that would be open to abuse, especially because nothing stops the recipients from using it to purchase staff that does not alleviate cost of living crisis..

Botswana government has long promised in vague tones that it is working on some ways that would see some form of fiscal intervention.

It is not clear why this is taking so long.

There used to be a time when Botswana government was awash with cash.

That is no longer the case.

There is not much legroom left. As a strategy Botswana government has to give more attention to growing productivity.

But sure it is not beyond imagination that something can still be irked out from the reserves given the extent to which the cost of living crisis is biting.

Food and fuel are the two biggest concerns for now.

Other big hitters on the household bills are water and electricity.

If these are not addressed quickly the economy will collapse.

Botswana government should look around the world and see what the cost of living crisis is doing.

Sri Lanka is a case in point. All the chaos in Sri Lanka can very easily be traced to public finances difficulties that sparked a cost of living crisis.

Already we see people quitting their jobs simply because they do not have the means to report to work.

Households that can afford can be left out. But that would involve a lot of hard work on means-testing.

Botswana government debt – domestic and international has been growing.

Admittedly it has not reached the statutory ceiling set by an act of parliament.

But it is significant, and also worrying, not least because the terms of the billions owed China have not been made public.

RELATED STORIES

Read this week's paper