IMF trims Botswana growth prospects
Brian Benza | Wednesday January 6, 2016 18:00
The IMF had previously forecast the economy to grow at 4.4 percent in 2015. “After recovering strongly from the 2009 downturn, Botswana’s pace of economic activity is slowing in 2015 owing to weaknesses in the global demand for diamonds,” IMF executive Enrique Gelbard said following a two-week visit to Botswana. On the back of the headwinds faced by the economy, government last September halved 2015 economic growth forecasts to 2.6 percent, although other analysts such as those at Econsult, were even more pessimistic, projecting the economy to grow by a paltry one percent in 2015.
An IMF staff team, led by Gelbard visited Gaborone during December 7–22 for discussions on the 2015 Article IV Consultation with Botswana.
The discussions centred on near term policies to counteract the current economic slowdown and on the reforms and investments needed to foster diversification and inclusive growth.
At the end of the mission, Gelbard said the decline in mining receipts, coupled with a decline in revenues from the Southern African Custom Union (SACU), has led to a fiscal deficit of about 1.4 percent of GDP and a lower external current account surplus.
“Thanks to sizable fiscal and foreign exchange savings, the country is well positioned to weather the current slowdown,” Gelbard said. “Economic growth is projected to pick up in the next couple of years, supported by a gradual recovery in the global diamond market, low domestic interest rates, and the impact of the government’s Economic Stimulus Programme. The authorities’ goal to return to fiscal surpluses in two years is appropriate, and will require both non-mining revenue mobilisation as well as moderate growth in spending.”
As part of jumpstarting economic activity, government has announced an economic stimulus programme, whose details are expected to be unveiled in the 2016/17 national budget.
The IMF further said the medium-term measures that the government is contemplating for the forthcoming National Development Plan (NDP) provide an opportunity to take stock of the experience so far and accelerate key reforms to promote economic diversification, growth and job creation.
According to Gelbard, the main reforms include improving the efficiency of public investment, involving the private sector, establishing independent regulators, and improving quality of service in electricity and water supply and reducing skills mismatches by focusing on training, apprenticeship programmes, and lowering barriers to hiring skilled foreign workers.
“The authorities’ plans to remove impediments to doing business will complement the above measures. Setting up Special Economic Zones may also promote new activities, but caution will be needed to avoid costly tax incentives and results will have to be closely monitored,” the team recommended.
While in Botswana the team met with Bank of Botswana Governor, Linah Mohohlo, the Minister of Finance and Development Planning, Kenneth Matambo, Permanent Secretary at the Ministry of Finance and Development Planning, Solomon Sekwakwa, other senior government officials, and representatives from the private sector and development partners.