Thursday, July 7, 2022

National Budget postponed to next week

The national budget speech which was initially slated to be delivered this week has been pushed to February 07. The postponement follows an ongoing emergency Parliament which started in late January and discussing amongst other things Bills that seeks to help Botswana exit the Financial Action Task Force (FATF) grey listing.

In November 2019, Botswana was once again kept in the list of countries grey-listed for having strategic Anti Money Laundering and Counter-Terrorism Financing despite some efforts the country undertook to avert being black-listed by international regulators. The diamond nation was stunned by the Financial Action Task Force (FAFT) in 2018 when it was listed alongside countries that do not comply with AML/CFT regulations.

After Botswana was grey listed, the government made high-level commitment to work with the FAFT and Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) to strengthen the effectiveness of its anti-money laundering controls. The country’s law-making body, parliament, rushed through several Bills concerned with AML/CFT regulations in the hope that Botswana will be removed from FAFT and EU lists.

The passed regulations partly helped when in 2019 when the FAFT said the country has reduced some strategic deficiencies that were noted in 2018, signalling that the country is getting close to being removed entirely from the list.

The government has previously expressed concerns on how the grey-listing was making it hard to attract foreign direct investment (FDI). Now with the EU maintaining Botswana as a high-risk country, this will slow down the efforts by President Mokgweetsi Masisi, who upon ascending to the presidency in April 2018, took around the globe seeking FDI.

Botswana’s national risk assessment results show that at national level the country is grappling with money laundering, rating the outlook at medium-high, as the national vulnerability to money laundering remains high. The results released in 2018 by Non-Bank Financial Institutions Regulatory Authority (NBFIRA) also reveal that the economy’s main threats emanate from the high incidence of poaching, motor vehicle theft, tax evasion, fraud and corruption.

Meanwhile Finance and Economic Development Planning Minister Peggy Serame is expected to deliver her first budget speech next week Monday.

Serame in December 2021 made it back to parliament to seek additional funds, requesting P2.44 billion, with P587.3 million going towards the recurrent budget and P1.86 billion for development budget.

From the requested P587.3 million for recurrent budget, 95 percent of the funds will be channelled towards the ministry of Health and Wellness, while P26.7 million will be used by the ministry of Defence, Justice and Security to support the Botswana Defence Force (BDF) squad stationed in Mozambique after their peacekeeping mission was extended by three months.

The extra P1.86 billion for development budget will be gobbled by the ministry of Land Management, Water and Sanitation Services as it implements water infrastructure projects across the country.

Serame’s latest request comes four months after another supplementary budget request after the Finance ministry received supplementary budget requests from eight ministries but could only fund half of those ministries, with her supplementary request limited to P2.49 billion.

In a sign that the pandemic has teared the national budget planning, Serame’s July request was on the back of another supplementary request made by her predecessor Dr. Thapelo Matsheka, who was moved from the Finance ministry’s portfolio in April, following challenges of trying to balance the budget amid a pandemic.

In September 2020, Matsheka found himself in parliament requesting nearly P4 billion in supplementary budget to the one he brought before parliament twice. Matsheka also had to revise his initial February budget, cutting projected revenue for the 2020/21 financial year from P62.4 billion to P48.8 billion while he planned P67.6 billion government expenditure was reduced to P59.6 billion. But this was also changed down the line.

According to the Finance ministry’s Budget Strategy paper for the 2022 financial year released in September, the country is set to experience worsening budget outruns. From a budget shortfall of P1.9 billion in the financial year 2017/2018, this swelled to P8.8 billion in 2018/2019 and P9.5 billion in 2019/2020, bringing the cumulative budget deficits to P20.2 billion in the first half of the eleventh national development plan (NDP 11) which began in 2017.

The last half of the NDP 11 will also be plagued by deficits. The 2020/2021 financial year resulted in a P16.4 billion deficit, while the current financial year 2021/2022 is set to deliver a P10.2 billion shortfall and will be followed by another deficit of P8.4 billion in 2022/2021.

The Finance ministry officials are forecasting a budget surplus of P3.9 billion in 2023/2024 and big windfall of P7.7 billion in 2024/2025.

To fund these deficits, the officials said they country will have to borrow from local and foreign markets as the government investment account that has been previously used to fund budget outruns is also running low.

The World Bank in June approved a $250 million (P2.7 billion) credit under the Programmatic Economic Resilience and Green Recovery Development Policy Loan (DPL). In addition, Serame this week asked parliament to approve a P1.57 billion loan from the African Development Bank to finance part of the projected budget deficit during the 2021/2022 financial year.

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