Reserves, bonds to fund 2015/16 deficit
Mbongeni Mguni | Tuesday September 15, 2015 18:00
The deficit, which represents 2.6 percent of GDP, is the first in four years but secretary for economic and financial policy, Taufila Nyamadzabo said government would have no troubles funding the shortfall.
“We will draw down our reserves at the Bank of Botswana and we also have the bond issuance programme,” he told Mmegi Business at the budget pitso on Friday.
“It is not a substantial amount and it is a small proportion of the GDP,” he said.
During 2009 and 2011, government ran successive budget deficits ranging from P181 million in 2011/12 to P9.5 billion in 2009/10, as government “spent” its way out of the recession by supportive expenditure.
The projected deficit for this financial year stems from a drop in forecast mineral revenues due to lower global demand, particularly for diamonds, as well as anticipated softer customs revenues due to low growth in the region.
Debswana is already expected to cut its production from an original target of 22 million this year to 20 million in line with its policy of keeping diamonds in the ground whenever the market is unable to support extraction.
Botswana may also have to pay R7 billion back to the South African treasury after an adjustment of the share the country was supposed to receive from the Southern African Customs Union (SACU).
“In October, South Africa said SACU revenues would go down, which means for this next financial year, we may even have to pay back for over-compensation,” he told the Budget Pitso. “This is likely to be the case and the figure is about R7 billion in over-compensation from the last year.” The failure to finalise a new concrete SACU revenue sharing agreement was also adding uncertainty to future budget revenue forecasts, with Nyamadzabo pointing out that negotiations had been stalled since September 2013.
Total revenues for 2015/16 are now forecast 6.7 percent down from the original forecast in February at P51.7 billion, while expenditure has been driven higher by emergency drought relief and civil service wage adjustments. Nyamadzabo said the high cost of power imports had also weighed on the budget for this year.
“We had the problems of power from Morupule B, which forced imports from Eskom as well as the emergency diesel generating plants and the costs have been quite expensive,” he said.
Botswana’s reserves have fully recovered from the 2009 recession and they were measured at P84.54 billion in June, of which the portion attributable to government was P41.3 billion. Bank of Botswana holds government bonds. A treasury bill floats every three months, under a P10 billion February 2011 increase to the original March 2008’s P5 billion note issuance programme.