Stimulus desperately needed but unlikely – StanChart
Lewanika Timothy | Monday July 21, 2025 06:21
Government spending in the economy through issuance of government purchase orders (GPO) and procurement of goods and services from the private sector remains constricted as government tightens its belt in the wake of declining revenues.
Unveiling its latest economic outlook update on Wednesday, Standard Chartered Bank Botswana economists shared that ordinarily constrained government spending in the country would necessitate a stimulus response through massive cash injection to improve liquidity and spending in the economy.
The bank noted that whilst the state of the economy called for a stimulus, it was unlikely for government to do so as public savings were emptying.
“The fiscus space is constrained and government savings have been eroded because of persisting deficits,” the economists said in a webinar. “If the country had savings it would have a stimulus but that remains unlikely as government savings remain pressured.”
Stimulus programmes are no strange occurrence to Botswana’s macroeconomic instrument. Last year government ran a stimulus injection through planned spending of P102 billion into the economy as an effort to jolt economic activity.
Other recent stimulus interventions include the various multi-billion Pula injections made by government during COVID-19 as well as the 2016 Economic Stimulus Programme when government dipped into reserves to finance various sectors of the economy.
Standard Chartered economists said that government has been slow to implement fiscal adjustments, especially on cutting back on spending. This, they said, has made the fiscal deterioration reach current levels.
The economy contracted by 0.3 percent in the first three months of this year, continuing its depressed performance seen in the prolonged diamond downturn.
According to figures published by Statistics Botswana recently, the 0.3 percent drop in economic value added in the first quarter, compares to a contraction of 5.2 percent for the corresponding period last year.
Last week, a leaked government memo announced the halt of the issuance of GPOs, the main instrument used by various government entities to make payments.
On Wednesday in Parliament, Finance Minister Ndaba Gaolathe clarified that the halt was on the automatic issuance of GPOs by the government system, in order to allow more scrutiny of all payments going out of the public finances.