Old wage bill alarms ring again
Lewanika Timothy | Tuesday January 13, 2026 17:17
With the government wage bill projected to surge to P38 billion in the next financial year, global fiscal watchdogs have resounded old alarms, repeating their concerns over the sustainability of public spending.
Botswana’s wage bill stands at least 13% of GDP, higher than that of any country in the Southern African region, underscoring the bloated size of the public sector. Budget figures show that government plans to spend P89.1 billion in the 2025/2026 financial year, with P36.6 billion going to wages and salaries, crowding out fiscal space and steadily suffocating funding for development priorities.
The International Monetary Fund (IMF) has once again sounded the alarm over Botswana’s expanding public sector wage bill, warning that it remains misaligned with productivity gains and overall economic output.
In its annual bilateral economic assessment known as the Article IV mission, the Fund reiterated long-standing concerns that authorities have failed to rein in wage costs or establish effective wage-bill controls, even as economic activity slows.
IMF researchers, who have cautioned Botswana on the issue for years, expressed familiar concern over government’s inability to set parameter controls over the wage bill, noting that the opportunity cost of not acting is billions of pulas in foregone capital that could otherwise be used for investment or enhanced social spending.
“The wage bill absorbs more than 13 percent of GDP and about 58 percent of total tax revenues, well above levels observed in most peer countries. “Its elevated size reflects both relatively high compensation levels and the large number of public employees. “This has constrained fiscal space for growth-enhancing investment and social spending, while creating rigidities that complicate adjustment during downturns,” researchers noted.
In labour economics, when labour markets are dominated by the government, an imbalance between the private sector and government emergs. Government often times pushes the price of labour up in the market because of its ability to afford, with more and more people ending up crowding in the public sector.
Confirming this, Botswana’s government has grown to become one of the largest employers in the formal economy, outbidding the private sector for skilled labour and exerting upward pressure on labour costs. Research from past IMF mission papers shows that as far back as the early 2010s, Botswana’s share of public employment and premium wages compared with the private sector were already significantly higher than in many middle-income countries.
This trend has real economic consequences. With a large slice of revenue committed to salaries and recurrent costs, Botswana’s fiscal space for investment in infrastructure, diversification initiatives and social services has been severely handicapped.
Economic research consistently shows that while public investment is expected to drive up economic growth, its impact weakens when government spending is dominated by recurrent costs such as wages. This is a risk Botswana has continued to carry over the years even when mineral revenues went on a decline. The outcome has been a tightening fiscal squeeze, with public debt approaching the statutory limit of 40% of GDP and the budget deficit widening. IMF economists warn that without firm action to contain personnel expenses, Botswana will have limited capacity to absorb external shocks or invest in sectors that support long-term growth.
Both the IMF and the World Bank have urged Botswana to modernise its fiscal framework. A World Bank commentary in late 2025 reiterated calls for trimming the wage bill and tying wage policy more explicitly to fiscal and economic indicators, a move that would require policymakers to define the wage bill as a proportion of GDP or total expenditure and enforce that boundary.
“Adoption of a comprehensive medium-term wage strategy could help gradually bring the wage bill to about 11 percent of GDP, closer to peer countries,” the commentary said. “Such a strategy could encompass hiring restraint, careful management of promotions and allowances, and alignment of wage growth with productivity gains. “Structural reforms such as the implementation of a coherent pay and grade system, the modernisation of human resource management systems, and the strategic reallocation of staff toward priority sectors would also be needed.”
Analysts note that unchecked wage growth doesn’t just dent budgets; it can distort labour markets and suppress private sector dynamism. A large public sector with comparatively high pay can draw workers away from nascent private industries, undermining competitiveness and limiting job creation outside of government.
IMF country studies going back over a decade highlighted such distortions, pointing to a sectoral imbalance that has contributed to structural unemployment, particularly among youth.
For its part, the Finance Ministry has started an evaluation of the Payroll Management System, noting that public service wage bill has expanded significantly in recent years, “posing a risk to fiscal sustainability and crowding out essential expenditures such as health services”.
“Left unchecked, this trend may also increase national debt,” Finance Minister, Ndaba Gaolathe, told Parliament last month. “The audit is, therefore, expected to recommend measures including strengthening existing structures to ensure that the wage bill is brought under control. “This exercise aims to enhance the overall control environment of the Payroll Management System by tightening oversight, improving security measures, and promoting greater efficiency, thereby reducing the risk of irregularities.”
Preliminary findings will be presented in December 2025, with final sign-off anticipated by April 2026, he said.