A bird’s eye view of the 2023 Budget Speech
DR. LOVEMORE TAONEZVI* | Monday February 13, 2023 06:00
Despite anticipated deceleration of global economic growth in 2022 and 2023 by 3.4% and 2.9%, respectively, Botswana strongly rebounded from the adverse effects of the pandemic posting growth of 11.8% in 2021 with growth projected to 6.7% and 4% in 2022 and 2023, correspondingly.
While inflation was significantly above the Bank of Botswana’s target of 3-6% in 2022, mitigating measures such as interest hikes, temporary reduction in VAT rate and zero rating of some food commodities helped to arrest the acceleration of inflation, leaving it at 12.4% in December.
Despite the positive economic performance in 2022, a number of global risks still confront Botswana’s economy. Among these are the expected slowdown in global growth and recession in advanced economies, prolonged global conflicts, and appreciation of the US Dollar.
These risks will potentially disrupt global supply chains and put upward pressure on food and fuel prices, and net importing countries like Botswana will have to contend with imported inflation.
Rising inflation combined with the resulting interest hikes erode disposable incomes and dampens aggregate demand in the economy, thus lowering employment levels and the rate of economic recovery.
The 2023 Budget is guided by six national priorities namely: Digital Transformation; Business Environment Reform; Infrastructure Development; Value Chain Development; Sustaining Livelihoods; and Climate Change.
These priorities are believed to be realisable when there is requisite human capital development. Therefore, a large share of the budget (P17.5 billion) is earmarked for initiatives, programmes and projects associated to human capital development.
Other major highlights of the 2023 Budget include:
• Customs and Excise receipts are the largest contributor to the estimated Total Revenues and Grants of P79.79 billion, amounting to P24.93 billion or 31.2%. Mineral revenue follows, making up P23.34 billion or 29.3%, while Non-mineral income tax is P14.77 billion, and VAT is P13.30 billion.
• Of the estimates Expenditure and Net Lending of P87.38 billion, P66.51 billion is allocated to the recurrent expenditure, while P21.01 billion is proposed for the development budget as well as Lending of P141 million.
• A budget deficit of P7.59 billion (3.06% of GDP) is expected in 2023/24 financial year.
• The approved budget for Ministerial Recurrent expenditure is projected to increase by 13% to P60.30 billion this year.
• The proposed budget for 2023/2024 is P21.01 billion, which is a 27.88% rise from the 2022/2023 budget.
• 24.9% of the Recurrent Budget has been earmarked for the Ministry of Education and Skills Development in order to promote the advancement of human capital.
• The majority of the Development Budget is allocated to the Ministry of Lands and Water Affairs, which is allocated P6.07 billion (28.89%). This funding will be used to implement important water projects.
• The list of items that are exempt from Value Added Tax will be reassessed and expanded to include items like sanitary products and private health care services.
• The Old Age Pension, Destitute Allowance, Disability Allowance, World War II Veterans Allowance as well as Ipelegeng rate will be increased.
The 2023 Budget Speech underlined some key achievements and challenges of NDP11.
Despite a number of notable achievements such as infrastructure development and removal of Botswana by the Financial Action Task Force from its blacklist, in terms of GDP growth, the NDP11 underperformed. Only an average annual growth of 2.7% was achieved as opposed to the projected 4.2% over the five years from 2017 to 2021. Major economic challenges experienced during NDP11 such as high unemployment, subdued growth and high inflation were partly a consequence of the COVID-19 pandemic and the Ukraine-Russia crisis.
Besides the external negative influences, the main constraints to economic development in Botswana highlighted in the Budget include rampant public sector corruption, poor project implementation, inefficient public spending, and persistent budget deficits.
Corrective measures are needed as a matter of urgency to deal with these impediments. In the TNDP and NDP12 periods, there is great need for the Government of Botswana to intensify the pursuance of macroeconomic stability and fiscal sustainability.
This is achievable through a fiscal strategy anchored on fiscal prudence and discipline, strengthening revenue mobilisation, improving the efficiency of public expenditure, improving the government's net financial asset position, maintaining debt sustainability, and ensuring budget transparency and participation.
The achievement of the aforementioned goals is crucial in the realisation of Vision 2036.
*Dr. Lovemore Taonezvi (Ph.D. Economics), Department of Entrepreneurship, Faculty of Commerce, BA ISAGO University