Another budget surplus, but risks loom large
Brian Benza | Tuesday February 3, 2015 18:00
Presenting the 2015/16 budget speech, Matambo said domestic economic growth would this year slow down to 4.9 percent from 5.2 in 2014 with the non-mining sector expected to drive growth instead of the usual economic lifeblood, diamonds.
According to the minister’s projections, revenues will outweigh expenditure by P1.23 billion or 0.8 percent of GDP in the financial year.
Total revenues and grants are seen amounting to P55.38 billion, of which mineral revenue will account for 34.4 percent, customs and excise 29.5 percent, while non-mineral income tax will contribute 17.5 percent.
“Mineral revenues are projected to grow by 10.4 percent, from P17.24 billion to P19.03 billion in 2015/16. This positive growth is however likely to be undermined by the downside risks associated with growth prospects in the global economy, resulting in reduced revenues, specifically from diamonds,” he said.
According to the IMF’s recently released projections, the global economy is expected to grow by 3.5 percent in 2015, down from a previous forecast of 3.8 percent.
Emerging and developing economies including Sub-Saharan Africa are expected to grow at a lower rate of 4.3 percent compared to 2014.
For the year, total expenditure is expected to total P54.1 billion with the lion’s share (P36.7 billion) earmarked for recurrent budget.
A total of P12.93 billion was proposed for the development budget with the largest share allocated to the Ministry of Minerals, Energy and Water Resources (MMEWR) at P3.32 billion or 25.7 percent of the budget.
“This will allow government to continue to address the water and power issues facing the country by putting in place appropriate infrastructure. Among the major projects to be funded under MMEWR include North-South Water Carrier II at P500 million, Kanye and Molepolole connection to the North-South Water Carrier at P150 million among others,” he said.
In spite of the global economic environment uncertainties, Matambo said he is still hoping that the domestic outlook, though seen weakening this year, is still high enough to drive the development of agenda of inclusive growth.
Despite economic indicators that have grown over the last decades, Botswana still has glaring development challenges, which include unemployment, poverty and income inequality.
Official data shows that income inequality in Botswana is one of the highest in the world with the Gini Coefficient having increased from 0.573 in 2002/03 to 0.645 in 2009/10.
Regarding unemployment on the basis of the population aged 18 years and over, this was estimated at 17.6 percent in 2009/10 with youth and women overrepresented in the army of the unemployed. Poverty figures also show a decrease in the poverty incidence between 2002/03 and 2009/10 and the percentage of the population that lives below the poverty datum line was 19.3 percent in 2009/10 compared to 30.6 percent in 2002/03 according to the latest Botswana Co-welfare Indicator Survey.
“We need economic growth. Without enlarging the size of the economy, it would be impossible to create jobs that the country desperately needs to address youth unemployment, and generate revenues to support government’s social welfare programmes,” he said.
In a bid to spur growth and employment, Matambo said that this year’s development budget would mainly be spent on infrastructure projects such as construction of new schools, new power transmission lines and water pipelines.
Analysts have previously advised government to craft new policies of stimulating inclusive growth as yesteryear periods of high economic growth failed to create enough jobs or eradicate poverty.
Botswana’s economic growth, which hovered around an average 8.7 percent in the period 1996-2001, slowed down to 4.4 percent during 2002-2006 before further easing to an average 3.9 percent during 2007-2013.
Due to the flagging economic growth rates and stagnating per capita income, the IMF has advised Botswana and several other African middle-income countries to implement momentous reforms to avoid a ‘middle income trap’.