When a World Bank team visits Botswana in two weeks to assess the economic situation, it will find that the country has five times the amount of money it wants to borrow from the World Bank and the African Development Bank to support its budget.
“The Bank will also find clear evidence of years of conservative economic management and a balance sheet that even in these times is the envy of most African and, in relative terms, many European countries,” says a report prepared by Ernst & Young.
In his budget speech earlier this year, Finance Minister, Baledzi Gaolathe, said the projected budget deficit would be financed by drawing down part of government’s reserves that have been built over the years (especially during the recent boom period) and by borrowing both domestically and internationally.
“This is in keeping with government’s role of stabilising the economy. In boom times, we do not spend all our income so that in recessions we are able to draw on our savings. Government will also finance some projects by borrowing,” Gaolathe said.
Botswana is now seeking P13 billion from the aforementioned banks and as the report notes, this is the first time that the country has contemplated interventions of any sort in the management of its economic affairs.
The global economic recession has badly affected diamond sales and that has been particularly bad news for diamond-dependent Botswana. Exports over the first quarter of 2008 have yielded diamond revenues of P1.182 million, which represents a more than 12-year low. Copper-nickel (P191 million) sales were the lowest in six years.
The Ernst & Young report suggests that the performance by the mining sector over 2008 was not all a result of the credit crunch.
“The diamond-mining industry in Botswana has [acknowledged] for some years to be entering a period of decline. The credit crunch has exacerbated the problem in the short to medium term. The diamond industry worldwide forecasts recovery will take two years,” the report says.
However, it has not been doom and gloom. While non-mineral sales accounted for 12.3 percent of the quarter’s export revenue – a five-year low – textiles were “the brightest spot at 9.1 percent, five-year high.” Additionally, real growth in government sector over 2008 almost doubled to 7.8 percent from 4.2 percent. Says the report: “Over the last two years it has totally reversed two previous years of negative growth.”