Gov't develops P20bn economic recovery plan
Mbongeni Mguni | Friday June 26, 2020 16:08
Led by the finance ministry with input from other ministries, parastatals and agencies, the draft plan indicates that another P20 billion will be required to fund projected budget deficits between now and fiscal year 2022/23.
For several months, different ministers had been hinting that a comprehensive economic plan was being worked on at the highest levels of government, which would not only lift the economy but chart a new course for the period after the pandemic. According to a draft seen by BusinessWeek this week, the finance ministry is proposing that the funding for the plan, known as ERTP, come primarily from local borrowing and “domestic resource mobilisation”.
Local borrowings are done under the P15 billion bond and treasury bill programme managed by the Bank of Botswana (BoB) which President Mokgweetsi Masisi has been asked to increase to P30 billion.
Domestic resource mobilisation, meanwhile, involves reviewing taxes, public service charges and fees, lowering parastatal grants and other public subsidies, all ideas which have been frequently mooted before. BusinessWeek is informed that the Plan will undergo further scrubbing within government before going to Parliament, possibly the upcoming Winter sitting, for approval.
“The preferred options are domestic borrowing and revenue mobilisation,” the draft reads.
“However, they are unlikely to be sufficient to meet the entire funding needs over the remainder of the NDP 11 period (which ends in March 2023).” Besides higher domestic borrowing and dipping into foreign reserves, the draft proposes that the ERTP be funded through possibly increasing VAT from 12 to 14% over the three years of the plan. Since its introduction in 2002, VAT has been increased just once in 2010 and remains one of the lowest in the region.
Parastatals will need to do with lower or no government subventions and struggling ones such as the Botswana Power Corporation and Water Utilities Corporation will be supported to raise capital on the market. Consumers, however, may have to bear with higher utility costs as the two parastatals may have to raise their tariffs to cost reflective to reduce their dependence on government.
Other funding proposals include greater cost-sharing and cost-recovery in areas such as education and even health care, broader taxes to include charges for unused land and reducing tax exemption and also allowing local authorities to generate more revenues and even borrowing for themselves.
Another idea is to change the way in which Debswana finances expansion and life-of-mine extension projects, to move these weight of these costs from off shareholders and towards debt. Debswana’s Cut 9 and Cut 3 projects are being funded by De Beers and government as shareholders through lower dividends.
Nearly all the proposed funding sources and strategies have been previously recommended by entities such as the BoB and others, which have urged government to tighten spending and prepare for a future of lower diamond revenues.
The ERTP will focus on accelerated development of facilitative infrastructure, support for increased agriculture and manufacturing output, growth of the creative industry, improving the business environment and accelerating regulatory reform. It will also promote digital transformation, improve implementation, and address the effectiveness of monitoring and evaluation frameworks and performance management.