Sunday, May 29, 2022

Opposition grill government on borrowing

Two of the country’s opposition political parties, the Botswana National Front (BNF) and the Botswana Congress Party (BCP), have urged the government to avoid the debt burden by taking a leaf from Latin American countries which drew 75 percent of their foreign earnings to finance expenditure, ahead of the launch of the Open Budget Index (OBI) next week.

The launch, by the Botswana Institute for Development Policy Analysis (BIDPA), comes after a research for OBI 2010, with the International Budget Project amid a perception from the opposition and other quarters that President Ian Khama’s administration is getting increasingly careless with the national purse.

While the two political parties are not opposed to borrowing, which has recently been on the rise, they are calling for reprioritization of spending.

“There has to be a balance between borrowing and drawing from foreign reserves. The danger is that if you overdraw from the foreign reserves, which is normally done to avoid borrowing, then you might reach a level that is not acceptable and sustainable to finance imports and it can put the financial security of the country at risk. We can draw from the experience of Latin American countries, which were drawing around 75 percent of their foreign earnings to finance expenditure. They over-committed themselves particularly at a time when commodity prices were going down. This happened around 1981-1990 – the period known as the Lost Decade,” says the BNF spokesman, Moeti Mohwasa.

The BCP spokesman, Taolo Lucas, says an alternative to excessive borrowing is reprioritization of spending.

“At the moment, there is a lot of money that is spent on security and populist presidential pet projects. Lots of money is also spent on duplicity of efforts by government departments, parastatals and hubs. A realignment of the functions of government departments, parastatals and hubs will save a lot of money for government. It is also critical that for every thebe borrowed, its investment potential must be maximized to derive optimum economic benefit from the borrowed money,” says Lucas.

The BCP spokesman says, “Though borrowing is an option in times of serious financial hardships such as now, it must be done advisedly because it mortgages the lives of future generations to lending institutions and countries. Borrowing thus becomes a heavy economic burden to future generations. Borrowing becomes even burdensome when the money borrowed is not invested in productive ventures that could generate more resources for the country. Borrowing for consumption escalates the debt burden and it is a recipe for long term economic destruction.”

The BNF says the ruling Botswana Democratic Party (BDP)’s greatest failures have been on the diversification front and creation of employment.

“We need to diversify and reap maximum benefits from these resources some of which are not infinite.

Beneficiation will grow our industrial base, create effective demand locally for goods and services and, of course, create more employment opportunities. Unfortunately our advise to the ruling party on this issue, which goes back to the 1960s, has made them furious and given vent to their intolerance and open sarcasm while Batswana continue to suffer,” says Mohwasa.

The BNF says to avoid more borrowing, the government should draw from foreign reserves and avoid spending money on unnecessary projects.

“There is also need to invest in productive areas like agriculture and also allow the government to have a role in the economy to stimulate growth. In fact, it is the countries that had less government involvement in the economy by way of investment and regulation that were hardly hit by the credit crunch,” says the BNF spokesman.

“Extractive industries have a limited lifespan. It is thus imperative that revenues accruing from them should be used to the best extent possible to diversify the economy. Money from extractive industries should be channeled into developing other sectors of the economy such as manufacturing, commercial agriculture, tourism and the service sectors so that when the extractive industries reaches their natural life cycle, they will be an economic base upon which the country can be anchored. It is also important that the revenues from extractive industries are used to prevent environmental degradation that is often associated with exploitation of the same industries.
Communities living in areas where extractive industries are found should also derive benefit from the exploitation of such industries,” says the BCP.

Transparent budgets are credited for increased accountability by holding government accountable for its policies, improved effectiveness, attracting investment and decreasing cost of borrowing among other things.

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