New fiscal rule proposed under NDP11
Brian Benza | Friday October 28, 2016 18:00
Presenting the 11th National Development Plan (NDP11) to Parliament Wednesday, Finance minister Kenneth Matambo said the proposed rule is aimed at ensuring that revenues from non-renewable sources are largely invested in physical, financial and human capital that have potential to promote future growth, as well as to take into account the interest of future generations.
NDP11 is a medium-term socio economic planning framework covering a six-year period from April 1, 2017 to March 31, 2023.
Under the plan, government plans to accumulate revenues amounting to P365.08 billion while expenditure is seen at P364.03 billion resulting in a modest P1.05 billion surplus.
The expected surplus is almost 50% less than the P2 billion projected by the Finance ministry when the Draft NDP11 plan was first availed in May this year.
However, Matambo said the NDP11 Budget was likely going to be unsustainable as non-mineral revenues are projected at P240.24 billion, lower than the projected recurrent budget of P262.4 billion.
“This suggests possible non-sustainability of the projected NDP 11 budget, as the recurrent expenditure will not be fully financed from the non-mineral revenue source. This alone calls for continued measures to strengthen tax administration and strengthening of tax collection systems, as well as implementation of cost recovery measures,” he said.
Secretary for finance and economic policy, Taufila Nyamadzabo told BusinessWeek that implementation of the new fiscal rule, which is still subject to legislative approval, will begin in April 2017.
“If Parliament approves, the plan is to implement the new rule next year. Availability of financial resources will also be a key factor. “When implemented, the rule will see 40% of minerals revenues saved with the Bank of Botswana under the country’s sovereign wealth fund, the Pula Fund,” Nyamadzabo said.
Government currently has P35 billion saved in the Pula Fund at the central bank.
Under NDP11, real GDP is expected to grow by 4.4% per annum, with the mining sector growing at an annual average of 2.8% over the NDP 11 period. Non-mining sectors are expected to grow modestly by 4.6% annually.
Meanwhile, Matambo said the recent liquidation of the BCL and Tati mines will affect employment figures but will not have a significant direct dent on economic growth projections for the year.
However, the minister indicated that funding of the mines’ closure and other new challenges will force government to reprioritise expenditure in a bid to avoid widening the projected P6 billion budget deficit for the 2016/17 financial year.
“I must indicate that the amount required to fund the BCL liquidation process will be provided during this financial year. Furthermore, given the challenges with the energy, water and education sectors, there will be need for additional funding during the current financial year. In order to avoid worsening the budget deficit for 2016/17, government will have to reprioritise, both the recurrent and the development expenditure to cater for these additional funding requirements,” he said.
Government targets a growth rate of 3.5% for 2016.