Govt debt payments to increase by P7bn
Mbongeni Mguni | Monday February 13, 2023 06:00
According to draft budget estimates made available this week, the Ministry wants to set aside P17.1 billion for the repayment of interest and principle on various domestic and external loans in the upcoming financial year. This compares to P10.4 billion budgeted for the current financial year, which ends on March 31.
The loans include the payment of P3 billion to settle a local bond maturing in June this year. To finance the P7.6 billion deficit forecast for the upcoming fiscal year, government plans to raise a net of P3 billion from the local capital market and another P2.7 billion from external lenders.
The higher debt repayments come as Finance Minister, Peggy Serame, sought to give assurances on government’s commitment to returning the budget to a positive balance.
“We have carefully assessed the medium-term debt risk, distress or burden and our capacity to repay and I am convinced that our envisaged fiscal strategy will restore fiscal sustainability before we are forced into a fiscal/debt crisis,” the minister said in her 2023-24 budget speech on Monday.
“Ideally, however, we should be running budget surpluses so as to rebuild our financial buffers to provide resilience in the event of shocks as well as to minimise further debt accumulation.”
Analysts have cautioned that the country’s reach into external debt is coming at a time when interest rates are on the increase, a concern acknowledged by Serame this week. Other analysts have also said the strengthening of the US dollar in the short term will weigh heavily on government’s variable rate loans.
“A large part of the external debt portfolio charges variable interest rates, specifically the six-month London Interbank Offer Rate which has substantially increased from 0.65 percent in February 2022 to a high of 5.17 percent in November 2022,” the minister said.
Topping the list of payments in the upcoming year is about P1.2 billion in repayment of both interest and principle to the African Development Bank for a $1.5 billion loan made in 2009 at the height of the global recession.
Botswana has earned a name tag over the years of being a “reluctant borrower,” and despite boasting one of Africa’s highest sovereign credit ratings, the country has traditionally avoided foreign currency debt and depended on its own reserves during difficult periods.
Technocrats have previously taken the position that foreign currency-denominated loans could land the country in a precarious debt position, as its repayments are based largely on diamond mining, whose performance fluctuates from year-to-year.