More diamond money for capital projects
Brian Benza | Friday September 19, 2014 15:21
As part of a review of policy governing the use of public funds, government will from next financial year increase the percentage of mineral revenues allocated to capital projects in each annual budget from 50 to 60 percent.
Speaking at the Stakeholders Pitso for the 2015/16 national budgets held in Gaborone yesterday, Secretary for finance and economic policy in the Ministry of Finance, Taufila Nyamadzabo, announced a revision of the fiscal rule effective next year.
“From next year, 60 percent of mineral revenues will be invested in capital projects and 40 percent saved for future revenue. The revision of the rule aims at the sustainability of posterity and government operations beyond the diamond era by reducing the amount of diamond revenues that is allocated to recurrent expenditure. We want to see the non-mineral economy dominantly financing recurring expenses such as wages,” said Nyamadzabo.
In the 2014/15 budget, government projects to collect P50.18 billion in revenue and grants comprising of customs and excise at P15.97 billion, non-mineral revenues at P15.66 billion and mineral revenue at P15.24 billion.
The development budget on the other hand stands at P12.24 billion for the current financial year, with the lion’s share of the funds going towards the two Morupule power stations, dams, roads and bridges.
Whereas Botswana has had fiscal measures in place, the recent financial crisis has necessitated the revision of fiscal rule whose main components are revenues, expenditure and budget balance.
On the expenditure side, government will also contain the share of total spending to GDP under 30 percent in NDP11 and beyond. Previously, the fiscal rule set the government expenditure at a ceiling of 40 percent to the GDP. Government’s overall expenditure has continued to spiral largely due to increases in the wage bill. According to the Budget Strategy Paper (BSP) for the 2015/16 fiscal years, expenditure and net lending amounted to P49.3 billion in 2014 up from P42 billion in the previous year due to the increase in recurrent spending from P33.0 billion in 2013/14 to P37.2 billion in 2014/15.
According to the BSP, the continued increase in the wage bill is largely because of, creation of new posts to cater for completed projects, formation of new parastatals, and catering for security services. Nyamadzabo admitted that the wage bill poses the greatest challenge to achieving the expenditure ceiling.
“In other medium income countries, the wage bill constitutes only about 5-6 percent of the GDP but in our cases it is as high as 11 percent.
Total expenditure and net lending is projected at P51.46 billion in 2015/16 from the estimated P49.3 billion recorded in 2014/15. Of the total, recurrent expenditure is expected to increase slightly to P38.995 billion, once again accounted for by the increase in personal emoluments.
“On the positive side, the share of the proposed budget for the 2015/16 financial years to GDP stands at 31.4 percent, which is close to the limit of 30 percent that Government committed to achieve in NDP 10,” he said.
With regards to revenue, the fiscal rule envisages collection of a minimum of 30 percent of non-mineral revenues to non- mining GDP to ensure adequate availability of non-mineral revenues to finance recurrent expenditures.
The implementation of this fiscal rule is also expected to contribute to the rebuilding of the country’s net financial assets, which dipped into negative balances due to the global financial crisis.
The net financial assets recorded a deficit of P3.3 billion in 2010/11, before worsening to deficits of P7.0 billion and P7.2 billion in 2011/12 and 2012/13, respectively.
In the last financial year, however, the net financial assets have shown some improvement, recording a much lower deficit of approximately P0.09 billion.
On the budget balance, Nyamadzabo said that the proposed budget for the 2015/16 financial envisages a small surplus of P1.389 billion of 0.8 percent of GDP.