Deficit relief must not invite complacency

Mmegi Editor | Monday September 28, 2026 06:00

“Financial freedom is more of a

journey than a destination.”

– Rob Berger

The preliminary 2026–2027 budget deficit has been revised down to P9 billion, which is an equivalent to 3.1 percent of Gross Domestic Product (GDP). It is an improvement from the P26 billion or 8.9 percent of GDP projected in February.

This P17 billion improvement is significant and deserves acknowledgement.

Government’s restraint on non-essential expenditure, tighter tax administration and broader revenue collection appear to be producing results. A P2.5 billion budget surplus recorded in June also pints to improving short-term fiscal management.

These are genuine green shoots. After years in which weak diamond revenues, rising borrowing requirements and persistent deficits placed the public finances under pressure, the narrowing deficit should help restore confidence in government’s capacity to manage the economy. Despite these first rays of light, caution remains necessary as we are not yet out of the woods. Part of the improvement came from the P8.1 billion windfall in expected revenue, driven mainly by higher-than-anticipated income from the Bank of Botswana. Although such revenue provides welcome relief, it should not be treated as a permanent substitute for a broader and more productive revenue base.

The underlying structure of the economy remains largely unchanged. Botswana continues to depend heavily on diamonds and government expenditure, while private-sector growth remains too weak to generate sufficient jobs, exports and tax revenue.

Fiscal consolidation must also be carefully managed. Slower government spending can improve the deficit on paper, but indiscriminate expenditure cuts may delay infrastructure, weaken public services and reduce business activity in an economy where the State remains a major consumer. The challenge is therefore not simply to spend less, but to spend better. Government must protect productive expenditure, improve project execution and ensure that scarce public funds support infrastructure and sectors capable of expanding the economic base. Changes to VAT, income tax, customs and tax administration are expected to raise P2.47 billion annually. While additional domestic revenue is necessary, authorities must avoid placing excessive pressure on businesses and households already contending with higher living and operating costs.

The deficit reduction gives Botswana an opportunity to stabilise debt, rebuild fiscal buffers and redirect resources towards economic diversification. It does not eliminate the need for difficult reforms. Government should resist the temptation to interpret one improved fiscal outlook as a full recovery. The real test will be whether the gains can be sustained without relying on exceptional revenue, postponed expenditure or heavier taxation of a narrow economic base.

Botswana has gained valuable room to manoeuvre. That room must now be used to rebuild the economy, not to relax the discipline that produced it. The economy is the start and end of everything. You can’t have successful education reform or any other reform if you don’t have a strong economy.