Mmegi Online :: Rolling P24bn budget deficits until 2020
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Monday 10 December 2018, 15:12 pm.
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Rolling P24bn budget deficits until 2020

Botswana will incur rolling budget deficits amounting to P24.7 billion for the next three financial years to boost growth through fiscal stimulus but economists are sceptical about the sustanability of a mineral- led economy spending its way out of an economic downturn.
By Brian Benza Fri 16 Sep 2016, 15:53 pm (GMT +2)
Mmegi Online :: Rolling P24bn budget deficits until 2020








Largely due to a P4 billion rise in development expenditure, government’s spending is expected to outweigh revenues in the 2017-2018 financial year by P6.8 billion or -4.1% of the GDP.

Deficits of similar magnitudes are seen until 2019 before the budget shortfall declines to -2.2% in 2020.

Speaking at a 2017-2018 Budget Pitso held yesterday, deputy secretary for Macroeconomic Policy in the Ministry of Finance and Development Planning,  Kelapile Ndobano said the deficits are attributable to the projected modest growth in revenues, and continued pressures arising from the implementation of the Economic Stimulus Package (ESP).

The projected total revenues and grants for 2017-2018 is P52.8 billion with P59.6 billion expenditure, of which, P40.8 billion is earmarked to cover the recurrent expenditure, while P18.9 billion is planned as development expenditure.

“Amongst the major downside risks to the 2017-2018 budget outlook includes the continued slow recovery in the global economy, undiversified revenue base, and unforeseen emergency expenditures to address water and electricity supply challenges, and natural disasters like drought and outbreak of animal diseases,” he said. However, economist Keith Jefferis feels that by choosing the fiscal stimulus route to boost growth, government has chosen an easy way out, which will not be sustainable in the medium to long term.

“It seems the issue of implementing fundamental economic reform to boost growth has been put on the back burner for now as government looks to spend its way out of this difficult period. “Although fiscal stimulus

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has short term gains, and looks to be politically favoured and is easy to do, it is not sustainable. The rolling budget deficits amount to P24 billion in the next few years  yet our government savings are only at P33 billion.  If we are not careful deficits of this size will soon transform Botswana from net saver to a net borrower,” he said.

Due to drawdowns, government’s cash balances at the Bank of Botswana in the past year have declined by P8 billion to P33 billion as at July 2016.  

 Government says it will consider a mix of borrowing, both domestic and external, and drawdown on its cash balance to fund the projected budget deficits.

Turning to economic growth, Ndobano said government  targets a growth rate of 4.1% in 2017 up from a projected 3.5% this year with the outlook for 2017 underpinned by the expected improvement in the mining sector. “This positive growth is underpinned by the expected improvement in the mining sector.  The non-mining sector is also expected to contribute to the positive performance, with growth estimated at 4.6% in 2017,” reads the strategy paper.

For 2016, an economic growth rate of 3.5% is expected up from a negative growth rate of -0.3% in 2015.

The 2016 projected growth rate is, however, lower that the estimates announced by finance minister, Kenneth Matambo in February when he projected the economy to grow by 4.2% in 2016 and 4.3% next year.

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