Friday, August 12, 2022

“Botswana Government close to becoming a net debtor” ÔÇô Keith Jefferis

A discussion paper presented by local economist, Keith Jefferis, to the parliamentary Public Accounts Committee has highlighted grim consequences of Botswana Government’s high appetite for spending.

Jefferis has pointed out that the pattern to spend more money than is being generated has breached a long-standing policy objective of building up financial assets to replace depleting mineral resources.

As a result, said Dr. Jefferis, Botswana is close to becoming a “net debtor.”

The Public Accounts Committee, which has an oversight role on government expenditure, has been told that even before the global economic crisis hit Botswana, the country’s overall fiscal position had already started to become less favourable as a result of declining revenues.

One of Botswana’s foremost economists, Jefferis said going forward the challenges that the economy of Botswana faced included containing the budget deficit, reducing spending to 30 percent of Gross Domestic Product and keeping debt manageable.

Commenting broadly on Botswana’s public finances, he said on a general basis, expenditure should be sustainable, efficient and growth enhancing.

Public expenditure should “build the future growth capacity of the economy, should enhance the chances of the weak and should preserve value of national assets in the context of mineral exploitation”.

He emphasized the importance of social justice, especially taking care of the weak.
More importantly, he said the level and structure of spending should not lead to financial debt crisis.

“Public funds should yield ‘value for money’ and not be wasted,” he said.

Further highlighting the un-sustainability of the current expenditure trend, Jefferis, who is a former Deputy Governor of the Central Bank, said at the moment government expenditure is much higher than available resources, “hence has to be cut back.”

“Cuts should fall on lowest priority spending.”

He also emphasized the importance of prioritising projects based on their importance before spending.

He said the basis for prioritisation of spending must be rational and consistent with underlying principles.

Project appraisal and evaluation of benefits and or returns are important as a way of ranking and or prioritising projects based on their importance to the nation.
Another factor to be considered in prioritisation should be economic impact of the projects, with particular emphasis placed on social justice.

He said there should be no supplementaries to project expenditures as is currently the case.
On debt management, Jefferis, who is also a former senior economics lecturer at the University of Botswana, said while, historically, debt was a none issue for Botswana, in recent times both domestic and foreign debt have risen rapidly.

In that respect he called for close monitoring in respect of adhering to statutory limits as well as managing interest and repayment of that debt.

He said attention should also be paid to impact on debt service on the overall public budget.
As a way of taking the public on board and ensuring transparency, Dr. Jefferis called on the authorities to regularly publish information on debt for public consumption.

For their part, in their summary, the Public Accounts Committee said they were worried that while, over the years, government had been able to contain expenditure below 40 percent of GDP, in 2009/10, expenditure reached an all time high of 46 percent of GDP “and the situation calls for closer monitoring of expenditure.”

The PAC also said with both domestic and foreign debt having increased substantially there is a need for “professional debt management”.

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