Gaolathe’s make or break budget
Mbongeni Mguni | Monday February 9, 2026 08:48
Thus far, Ndaba Gaolathe has spent much of his tenure thus far as the Finance Minister fighting to steer the country away from a fiscal cliff, which is defined as the point where government finds itself unable to pay its debts.
Since assuming the office in November 2024, Gaolathe has each day battled to keep the fiscus going, balancing ever tighter revenues with stubbornly steady recurrent obligations and developmental commitments, all the while mapping out a transformational plan, the BETP, to remove the country from the crisis.
Barring a miracle, the upcoming financial year, 2026-27, is unlikely to be different.
“For many years, our national advantage included a cushion: stronger reserves, wider fiscal space, and the confidence that government could both design reforms and fund them,” he told a recent Budget Pitso. “That era has passed. “Today, buffers are thinner, fiscal space is tighter, and the room for inefficiency, delay, and fragmented spending has narrowed dramatically.”
Gaolathe’s challenges as well-chronicled and on paper at least, simple to understand. The general downturn in mineral revenues over the past decade intensified in the latter half of 2023 with diamond demand plummeting sharply. Already weak from COVID-19 spending, the Government Investment Account (GIA) or the “cushion” was quickly run down, forcing government into taking on increasing amounts of debt and ever-rising interest rates.
Government has generally run budget shortfalls or deficits since the 2017-18 financial year and the fiscus in the past two financial years has been running on fumes. On one side has been the unstable mineral revenues, fluctuating quarterly payments from SACU as well as various taxes whose amounts are highly variable and dependent on economic activity. On the other side has been a stubborn civil service wage bill, support to parastatals, the development and maintenance budget and of late the growing debt repayments.
Since July 2024, a trend has developed where government, via the Bank of Botswana, is financing part of its budget at different times by rolling over its short-term borrowings from the local capital market. Heavy borrowings have been made mainly on a three- and six-month repayment basis, with these payments made via more short-term borrowings which are then repaid the same way.
Going into 2026-27, realistically speaking, Gaolathe and his technocrats do not have much wriggle room on the revenue side of the equation. From their own forecasts published recently, mineral revenues are due to remain damp, while non-mineral taxes will help but be restrained as they are largely dependent on economic activity, which in turn remains anchored on government spending, which in turns has been weakened by damp mineral revenues.
SACU revenues are an unpredictable stream, threatened every day by the increasingly frosty relations between the United States and South Africa.
The announcement of a trade deal between the US and India this week lends support to the recovery of diamonds as does the long-awaited renewal of the Africa Growth and Opportunity Act trade deal between the US and Africa.
However, all indications are that the increasingly stifling downward pressure on revenues that began more than a decade ago, will continue in 2026-27.
Where Gaolathe has control, is on spending. The Finance Minister and his technocrats have cautioned that the upcoming budget will require “drastic” cuts which is the logical step to a situation where your revenues are far less than your planned spending and you’re incurring increasingly higher costs for the debt you take on.
“The upcoming 2026-2027 Budget Speech will outline additional austerity measures, over and above those already in place,” Gaolathe said in his inaugural mid-term budget review statement in December. “These measures will be firm, targeted, and implemented without delay. “These actions are necessary to restore discipline to public finances, safeguard our creditworthiness, and ensure that government lives within its means.”
In the current financial year, the Finance Ministry centralised Government Purchase Orders (GPOs) and also introduced a travel moratorium while also curbing overtime payments. Travel costs and overtime pay rank amongst the most paramount drivers across government, the minister revealed.
Additional measures in the upcoming budget are expected to include the payroll audit, a process being guided with the assistance of the World Bank. Analysts also expect to see greater prioritisation in the development budget.
Critics however say while technocrats have previously pledged to cut back spending, especially on recurrent items, they have bowed to political considerations in accommodating requests that either do not resonate with the austerity required or are not even budgeted for.
Several electoral commitments made by the new administration were pushed through in the 2025-26 budget, despite lower revenues and going into 2026-27 pledges have already been made to accommodate more.
The critics point out that while Finance Ministry technocrats highlight cuts made to the 2025-26 budget, analysis shows that these were mostly in development expenditure which is set to fall by 42%, compared to a forecast drop of about 12% for the recurrent.
Econsult founder and prominent economist, Keith Jefferis, stresses that going into 2026-27, the slowdown in spending will have to be much more pronounced.
“Rationalisation needs to go much further than recent measures that have involved trimming some relatively small expenditure categories (travel, overtime), delaying other expenditures (reducing GPO issuance, building up arrears and delaying some new development projects),” he said in Econsult’s update for the fourth quarter of 2025. “But this doesn’t create a long-term solution, which has to involve reducing the government wage and salary bill, rationalising social spending with better targeting, and addressing the development budget and focusing it on high impact projects that will genuinely help to improve growth prospect.”
Jefferis said the recently released Budget Strategy Paper makes it clear that government is at risk of running out of money – with results such as being unable to pay salaries – unless urgent measures are taken to rein in the deficit.
For Gaolathe, the shift to austerity does not only include spending cuts, but should pay more focus on efficiency of systems and wastage, areas that his predecessors have wrestled with over the decades.
“Austerity is not simply about taking away services,” he said at the Pitso. “Austerity takes into account the fact that there's a lot of fat in our system and a lot of money that is being wasted on things that we can do away with. “One of the things that we are performing poorly in as a government system is actually our revenue collection systems and so forgetting about increasing taxes and increasing fees, just optimising what's already on the table. “We are working on it.”
According to the Finance Minister, government’s collection rate in terms of taxes and other dues is currently estimated at about 15 percent of the Gross Domestic Product, compared to countries such as Georgia and Morocco which hover around 25 percent. Better systems, digitisation and efficiencies could enhance this rate and ease the pains in the budget without recourse to significant tax and levy increases, Gaolathe said.
“If we were to get our systems right, we should be able to significantly augment our collection without over-stressing the already stressed population,” he said.
Whether those efficiencies can be tightened in the 2026-27 financial year quickly enough to reduce the need for either drastic spending cuts or increased debt, remains to be seen.