Saturday, December 4, 2021

Will Matambo announce a near-balance or deficit budget?

Although government has through its Budget Strategy Paper (BPS) announced that it anticipates a deficit budget, there is speculation that the funds budgeted for the Economic Stimulus Programme (ESP) as announced late last year could stir the national accounts to a near balance. 

In September 2015, government announced that it will kick start a special economic programme that is meant to stimulate the domestic economy following downward projections on GDP growth by both the government and international rating agencies. Finance Minister Kenneth Matambo is expected to deliver his budget speech next week Monday in which he will amongst other things provide updates on both the ESP and the national accounts. The ESP was first announced shortly after government slashed its 2015 growth forecast from 4.9 percent to 2.6 percent in September, saying the country will post a budget deficit even in 2015.

The domestic economy’s past growth has been spurred by mining output which outpaced non-mining private sector growth. However, mineral revenues are expected to decline in the short-to-medium term while SACU revenues are under threat. This has resulted in business losing confidence in the local economy. A survey carried by the central bank shows that business confidence has since deteriorated from 52 percent in September 2014 to 44 percent in March 2015. As a result, the government has since slashed its 2015 growth forecast from 4.9 percent to 2.6 percent. Despite these projections, a research fellow at Botswana Institute for Development Policy Analysis (BIDPA), Dr. Grace Tabengwa on Friday suggested that the ESP money could push the national account to a near balance budget. 

Tabengwa pointed out that the 2016/17 budget could also aim to promote inclusiveness and addressing inequality through continued improvement in access of services and utilities.

“We expect a near balanced budget or at most a moderate surplus in view of the funds that will be drawn down from the reserves to support growth via the ESP.”

While many economic commentators and financial analysts have scolded government for being obsessed with running a surplus or balanced budget, Dr Tabengwa maintains that fundamentals do not allow deficit funding for a long time. Botswana ran a fiscal deficit in 2010/11 financial year before it was contained with a balanced budget in 2012/13 financial year. National budget archives figures show a deficit for P4.696 billion for 2008/09 financial year while in 2009/10 it stood at P9.321 billion. 

A budget strategy paper drafted by the Ministry of Finance and Development Planning in September last year estimates Botswana’s total expenditure and net lending to be at P55.72 billion against the original budget of P54.15 billion. As a result, Botswana is seen posting a deficit budget of P1.7 billion or minus 1.1 percent of GDP during the 2015/16 financial year. At the same time, the government’s total revenues and grants for the revised 2015/16 budget is estimated at P51.69 billion, a downward revision of 6.7 percent from P55.38 billion in the original budget.  

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