Inside govt’s spending cuts
Mbongeni Mguni - Pauline Dikuelo - Lewanika Timothy | Monday August 10, 2026 06:00
The moves come as fiscal authorities fight to trim the budget deficit, in order to slow down the pace of government borrowing and avoid a debt free-fall which would push the economy into a crisis.
At the last count, public debt was measured at P92.7 billion, a number expected to rise beyond P100 billion by the end of the financial year, or about 44% of Gross Domestic Product (GDP). While the government can borrow up to 60% of GDP after securing Parliament approval last year, Finance Ministry authorities and experts at the World Bank have warned that the slow pace of economic growth and uncertainty in diamonds could trigger a debt crisis.
Latest estimates indicate that long-stricken government finances have warmed up thanks to improved diamond sales in the first half of the year and a P7.3 billion windfall from the Bank of Botswana. However, the current level of debt and unstable state of the Government Investment Account leave no room for any shock or underperformance of the economy.
Heavy recurrent spending, such as the approved P80.3 billion for 2026-2027 versus about P74 billion in 2025-2026, has been blamed for rolling deficits dating back to 2017-2018, as the weight of government on taxpayers has continued increasing, despite a decade and a half of declining mineral revenues.
An April 30 memo from the Finance Ministry seen by Mmegi to accounting officers throughout the public service outlines a range of austerity measures, some aimed at State-Owned Enterprises (SOEs). Over the decades of deficits, the parastatals have enjoyed faithful strong support from government, despite many of them running at perennial losses and bailouts, even while enjoying statutory monopolies in their sectors of operations.
According to the memo, no increase in sitting allowances or payment of bonuses or ex-gratia should be made this financial year to SOE employees, boards and committees this financial year.
For 2026-2027, SOEs are due to receive the lion’s share of the P16.1 billion allocated to local authorities and parastatals, an amount that has enraged some as SOE books are laid open before the ongoing Public Accounts Committee (PAC).
PAC members and the public have reacted with outrage at some of the revelations about parastatal management, financial accountability and CEO remuneration.
According to the Memo, requests for subventions from SOEs and local authorities should be “thoroughly assessed and released based on the financial health of the entity”.
Other austerity measures in the memo include requiring accounting officers to revert to the Finance Ministry on big-ticket items in project expenditure, ring-fencing of maintenance spending to ensure that funds are not directed elsewhere, as well as limits on training and travel, amongst others.
“The Ministry of Finance continues to monitor the fiscal impact of the prevailing situation and will issue further guidance as and when necessary,” reads the memo. “This may include withdrawal of part of the approved budget allocations to contain spending within the affordable resource limits. “Your cooperation, collaboration and solidarity during this period of heightened economic and fiscal pressure is critical in maintaining Botswana’s fiscal sustainability.”
While Finance Ministry officials were yet to respond to a Mmegi enquiry sent a fortnight ago on the memo, insiders said similar instructions and advice had been made under the administration of the former minister, Peggy Serame. Whether the instructions were followed is unclear.
The ministry’s permanent secretary, Tshokologo Kganetsano, told the PAC last week that government has saved approximately P3.3 billion thanks to efficiencies around overtime allowances, travel and the centralisation of Government Purchase Order (GPO) recurrent spending in the Finance Ministry.
“The centralisation of GPOs has significantly reduced spending commitments, with the number of GPOs declining from 231,369 in volume, which translates to P11 billion in value in 2024-2025, to 136,292 or P8 billion by February 2026, thereby delivering substantial P3 billion in cost savings,” Kganetsano told legislators. “Overtime expenditure, as at the end of March 2026, reduced from P781 million to P675.4 million, generating savings amounting to P105.8 million while travel expenditure declined sharply from P717 million to P466 million, yielding savings in the amount of P251 million.”
Kganetsano said besides legislative updates to tax laws and plans for the introduction of VAT e-billing, the BURS had stepped up its debt and arrears recoveries, with P9.8 billion collected through the Intensified Revenue Collection Strategy.
The permanent secretary’s revelations before the PAC come as other figures point to an improvement in both the fiscus and the broader economy, a break from a two-year recession marked by some of the highest deficits ever recorded in the economy.
Debswana production rose 43% in the first half of the year compared to the corresponding period last year, a performance that suggests the economy could expand beyond the 3.1 percent forecast by government.
Bank of Botswana (BoB) officials recently noted a significant uptick in royalty and dividend payments to government from diamonds in the first quarter of the year. The central bank also paid a windfall P7.3 billion dividend to government in March, helping both public finances and overall liquidity in the financial sector.
Prominent economist and former BoB deputy governor, Keith Jefferis, estimated that the 2025-2026 budget deficit had declined to P13.9 billion or about five percent of GDP, from an initial estimate of P25.5 billion or 9.3 percent of GDP.
“The outcome is welcome, as it reduces the government’s borrowing needs, helps to rebuild the Government Investment Account, and reduces the build-up of arrears on payments due to be made by government,” he said in a recent commentary on the second quarter.
Jefferis, however, cautioned that while the 2025-2026 deficit appeared set to decline, it was not yet clear what the numbers represented.
“If we exclude the BoB windfall of P7.3 billion, the deficit would have been P21.2 billion, approximately P4.3 billion lower than the revised figure in the 2026 budget. “At this stage, it is not possible to determine how much of this saving came from lower spending or higher revenues as compared to the revised budget. “But if it has all come from expenditure savings, the P4.3 billion reduction would represent 4.4 percent of total budgeted spending. “This is welcome evidence of fiscal consolidation,” he said.
Jefferis added: “However, the Ministry of Finance still needs to bear down more strongly on spending across the whole of government to achieve budget sustainability.”
Even as economists welcome the emerging signals of recovery in the budget, unionists are concerned about the impact of austerity measures on public servants and the broader economy, which depends on government spending.
A representative of the six main public sector unions, Thabiso Mhlauli, said the unions have not received any formal government directive regarding cost-cutting measures. He said this is despite reports that some departments have introduced what the unions describe as “unconstitutional decisions” following the government's announcements.
'We are aware that some departments have taken unilateral decisions in an attempt to align with the government's cost-cutting measures,” he told Mmegi. “At Lobatse Institute of Health Sciences, management stopped paying nurses overtime and instead instructed them to take time off in lieu. “They also suspended staff training. “We intervened, and management initially agreed to settle the outstanding overtime payments in April at the start of the new financial year. “However, when the time came, they reneged on that commitment. “The matter remains unresolved, and management has since referred it to the Ministry of Health.”
Another touchy issue for unionists and the broader public service is the local per diem, or the allowance paid to travelling civil servants. The government replaced the previous costly imprest system with a flat-rate daily per diem of P1,500, which civil servants welcomed.
However, late in June, in response to complaints by the hospitality industry, government instituted new arrangements to the per diem policy, specifically requiring civil servants to use up to P900 of the allowance for accommodation at licensed establishments and to provide receipts.
Later in the month, after pushback from unions, the government suspended the requirement, thus allowing civil servants to use the per diem freely without accounting for it.
Since then, the government has engaged the unions, but says the talks are a consultation. The Unions have said the talks are a negotiation, leading to a stalemate declared by both sides on July 29.
Mhlauli said the original rationale for introducing the per diem allowance remains valid and there has been no justification presented for departing from the principles upon which it was established.
'Any changes affecting employees' conditions of service must be negotiated rather than merely subjected to consultation,” he said. “Our position remains that any policy affecting employees' conditions of service must be agreed upon through collective negotiation. “The meeting with the government ended in a deadlock and implementation should not proceed until consensus is reached. “Should the government move ahead, the unions will be left with no option but to seek legal intervention while remaining committed to resolving the matter through meaningful dialogue.”
Meanwhile, economists, including technocrats at the BoB, are urging government to accelerate the structural reforms required in the economy to take full advantage of the breathing space provided by the improved budget performance.
Jefferis said there was a need for more reporting on the progress of the Botswana Economic Transformation Programme (BETP), in line with policymakers’ commitment to accountability.
“Other key reforms outside of the BETP, such as privatisation and improving governance and efficiency of state-owned enterprises, also need to be accelerated,” he said.
Absa Bank Botswana economist, Tshepiso Gaetsewe, said whilst the recovery in diamond demand offers near-term economic support, it should not diminish the urgency of Botswana’s diversification agenda.
“If anything, it provides a window of opportunity to accelerate reforms without the immediate pressure of fiscal strain. “The focus should remain firmly on operationalising the BETP, addressing structural bottlenecks, and embedding diversification as a continuous policy priority rather than a cyclical response,” she said in emailed remarks to Mmegi.
At the Finance Ministry, permanent secretary Kganetsano said as part of reforms, government had set up a task team to conduct a comprehensive review of the various social welfare programmes and beneficiary data.
The project aims to enhance efficiency in the welfare system and link this to the development of a digital social registry and digital Omang, a move long recommended by the BoB as part of optimising the efficacy of public spending.
“Data collection and validation across social protection programmes are currently underway to establish a credible beneficiary database, improve transparency and reduce potential leakages in the administration of social welfare allowances and grants,” he said.
Kganetsano stressed that government was focused on the efficiency of public spending, as it rolls out its cost-cutting measures. He told legislators that prudently prioritising spending, while boosting revenues and closing the deficit, would minimise the need to borrow, an approach he said was a form of a “self-imposed structural programme”.
“We are fortunate that we have examples around us with countries that were cash-rich and when their products were no longer selling, they thought they could maintain or sustain their level of spending through borrowed money and drawing down on their reserves. “Ultimately, their reserves were depleted, their currencies fell in value, and they found themselves in debts that they could not pay. “That's when the IMF and the World Bank will come in with a structural adjustment programme that they impose on you and say, ‘in a month's time, reduce the size of the public service by 50%’ and that’s one thing that they never shy away from. “So, yes, an adjustment is painful, but if you do it at your own volition, the pain is much less than if it's imposed on you.”