Masisi wants fairer debt deals
Mbongeni Mguni | Monday December 19, 2022 06:00
Masisi, some Cabinet ministers, and senior government officials were in the American capital for the US Africa Leaders Summit called by President Joe Biden involving more than 40 other African heads of state.
Masisi gave a lecture at the Brookings Institution, a non-profit public policy research organisation.
He was responding to a comment from the World Bank’s new resident representative to Botswana, Liang Wang, who asked how multilateral partners could support Botswana in its economic transformation ideals.
"Multilateral partners are very important to us but the way we relate must be more symbiotic,” Masisi said. “Take the rates of interest on borrowing money, the units of currency we borrow in.
“We need a much fairer transition to move away from where we are to where we need to be.”
Masisi added that multilateral partners, who include the World Bank, needed to be more patient with developing economies.
"I think multilateral partners have a lot to learn in terms of being patient and also recognising that even where they are from, it didn't take that short time to transition as they expect of us,” he said.
"Please focus on what really drives growth. "For far too long multilateral partners have focused on our commodities and the commoditisation of Africa and that's blatantly wrong and unfair because what happens is that everything is externalised in terms of the controls. “When you miss the boat with a payment, they become mean. “You set our people against us and that cannot be for peace or the Sustainable Development Goals or what you even stand for. "You have to really revamp your thinking in that."
The President’s remarks come as government takes on more external debt, which Finance Minister Peggy Serame said was to cover the estimated P7.7 billion budget deficit for this fiscal year and also to support economic transformation measures. The additional debt is also designed to rebuild the government’s reserves which took a beating due to COVID-19-related spending between 2020 and 2021.
Last week, the Finance ministry fast-tracked parliamentary approval of $211 million (P2.8 billion) in loans from the Japan International Cooperation Agency (JICA) and the OPEC Fund, while the African Development Bank (AfDB) separately said its board had approved a $179.7 million (P2.3 billion) loan to help Botswana “restore post-pandemic fiscal stability and economic recovery”.
The World Bank, meanwhile, is set to consider a $150 million (P1.9 billion) loan to Botswana early next year, which will be the second and last in a series that first produced a $250 million (P3.2 billion) facility in June 2021.
Government has come under criticism from members of Parliament for its debt drive, with former Finance minister, Thapelo Matsheka, last week saying future generations were being asked to bear the responsibility of paying off obligations incurred by current leaders.
“Purely from a fiscal and consolidation discipline, we are at a crossroads because there are a lot of things we need to do in order to avert what is seemingly going to become our way in the next four or five years,” he said. “The people who are going to pay this loan are not us but the generation coming after us. “If you don’t immediately start to deal with efficiencies, you load a greater burden on future generations, who are also dealing with high unemployment.”
Matsheka queried whether it was prudent to fund the budget deficit for one year by agreeing to a 17-year loan from OPEC, adding that while the borrowing was within the fiscal limits, government had to make sure it protects future generations from high debt obligations.
Botswana, which has one of Africa’s highest sovereign credit ratings, has traditionally avoided foreign currency debt and depended on its own reserves during difficult periods. Technocrats have previously taken the position that foreign-denominated loans could land the country in a precarious debt position, as the country’s repayments are based largely on diamond mining, whose performance fluctuates from year-to-year.
In his recent State of the Nation Address, President Mokgweetsi Masisi said the country was engaging different financiers to speed up the diversification of the economy from diamonds and help its industrialisation efforts.