Thursday, April 22, 2021

‘Prosperity for all’ remains a pipe dream

The Mid-Term Review of NDP 10 says that with the economy performing below expectations, it would be extremely difficult for the government to achieve the goal of “prosperity for all” as envisioned in the national Vision 2016. By the end of the plan, the cumulative deficit is expected to be almost P9.3 billion.

“While this situation is favourable when compared to the original cumulative deficit projection of P33.3 billion, this is significant and it points to the economy’s need to start generating budget surpluses that can be used to pay off part of this national debt,” the Review says.

It explains that NDP 10 implementation started under uncertain circumstances (one being mining output decreasing by 20 percent on an annual basis) caused by the 2008/09 global financial crisis.

Vision 2016’s original target for economic growth was 8 percent but had to be revised for NDP 10 to a more realistic 7.5 percent. However, the figure has been further revised down to a projected average rate of 5 percent, which would necessarily frustrate the government Vision 2016 plans because as the review notes, “prosperity for all can only be achieved when there is high level economic growth.”

“This under achievement of growth targets raises doubt as to whether the implementation of this Plan will achieve the Vision 2016 target economic growth rate. This is because the highest achievable rate of growth suggested by this set of figures is 5.6 percent for the financial year 2012/13 which is way too low when compared to the Vision 2016 economic growth target of 7.5 percent,” the Review says.

Even before the implementation of NDP 10 got underway, the situation was getting gloomy because “the NDP 9 rate of economic growth was relatively lower than that for the Plans before it.”
Additionally, the rate of growth for the first phase for NDP 10 has fallen lower than the average growth for NDP 9.

“Strategies and programmes that can increase the economic growth rate to levels closer to the Vision 2016 aspiration of achieving 7.5 percent are needed,” the Review suggests.

That notwithstanding, there is realisation that a number of factors militate against the possibility of improving this situation. One is the uncertainty in the diamond market whose buoyancy has been instrumental in improving Botswana’s economic fortunes and the other is the decline in diamond deposits “to levels that necessitate a major strategy revision with a possibility of underground mining which is more costly.”

Despite the negatives, the proportion of individuals living below the poverty datum line decreased from 30.6 percent in 2002/3 to 20.7 percent in 2009/10. The proportion of those below US$ 1.25 per day decreased from 23.4 percent in 2002/3 to 6.5 percent during the same period. The Review attributes this to government’s direct involvement in poverty eradication.

Generally, the figures that tell Botswana’s economic story are something of a mixed bag. Government revenues increased by 6.3 percent from P30.0 billion to P31.9 billion between 2009/10 and 2010/11 and corresponding expenditure for the same period decreased by 2.7 percent from P39.5 billion to P38.4 billion.

“The budget deficit for the period was P6.5 billion. For the period 2010/11 to 2011/12 revenues increased by 19.6 percent from P31.9 billion to P38 billion and corresponding Total spending moderately increased by 8.7 percent from P38.4 billion to P41.8 billion. This produced a budget deficit of P3.8 billion. At the end of the third year of the Plan the cumulative Budget deficit was P18.2 billion,” the Review says.

The annual rate of inflation is on the decline, having fallen from 8.8 percent in January 2012 to 7.5 percent in April 2012 and on the basis of the annual rate of inflation being continuously above the medium-term inflation objective range, “it is unlikely that Botswana goods will be competitive in global markets.” To that end, bringing inflation down has been identified as a major objective for the second phase of NDP 10 implementation.

As at end of December 2011, foreign exchange reserves stood at P60.27 billion compared to P50.8 billion in December 2010, enough to finance 18 months of imports of goods and services.

Noting that the end of NDP 10 coincides with the end of Vision 2016, the Ministry of Finance and Development Planning’s report hopes that “the current review of the plan is the last opportunity to adjust the Plan and the associated policies, with a view to coming as close as possible to the targets set out in Vision 2016.”

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