The 2010/11 budget tightrope

MBONGENI MGUNI
Staff Writer | Friday February 5, 2010 00:00

 

Essentially, Matambo is required to share a national cake that has shrunk by an estimated 8.2 percent since his predecessor performed the same task on February 2, 2009. The country's Gross Domestic Product (GDP) declined last year, with economic performance weighed down by lower government revenues and budget deficit that burst past P10 billion during the year.

The smaller cake can also be seen in the anticipated lower figures Matambo has to work with. Last year, government revenues were expected to come in around P24.4 billion, from which P37.8 billion was due to be spent on both the recurrent and the development budget, financed in part by loans and national savings.

Matambo's tightrope act involves balancing the various interests inherent in any budget. The diversity of interests inherent in the forthcoming budget has however been amplified by the lower revenues available to satisfy these interests.

The need for prudent fiscal management and the need to support the economy through the government coffers, are fighting for space within Matambo's plans. In this, the Minister is guided by three fiscal rules: that government spending cannot exceed 40 percent of GDP; that this year, the deficit should not exceed 10 percent of GDP and that a ratio of 70:30 should be maintained between the recurrent and the development budget.

With the gradual recovery in mining and other sectors, Matambo will anticipate higher revenues for the 2010/11 Budget, but lower incomes from the Southern African Customs Union will dent the coffers. With the economy slowly recovering, government spending -already restricted by the deficit rule - will almost certainly be significantly reduced.

Thus, civil servants will likely walk away empty-handed - again - from this year's budget, while ministries, departments and projects will either be scaled back, deferred or cancelled, depending on the criteria for prioritisation Matambo and his principals have used.

The 70:30 recurrent/development budget rule will also come under heavy scrutiny after Monday, as most economists have urged government to focus resources on projects that boost GDP and away from inflating the civil service. Should Matambo heed this advice, social development projects such as certain road construction could take the knock, while others such as the expansion of several airports, will receive support. Not in doubt, however, is the fact that Matambo, handling his debut budget during a financial squeeze, will adopt the principles outlined by his predecessor in the 2009/10 Budget. 'During 2009/2010 and beyond, there will be belt-tightening measures in Government, all aimed at improving efficiency in spending. This will go hand in hand with vigilant planning, prioritisation and the financing of carefully thought-out sustainable development projects and programmes.'

Who is Kenneth Matambo?Kenneth Ontefetse Matambo, widely regarded as a conservative in economic circles, has a wealth of experience in the upper echelons of the private and public sector. Between 1972 and 1998, Matambo scaled the hierarchy in the Ministry of Finance, starting as an economist, moving to principal economist, before becoming the Secretary for Economic Affairs and ultimately, the Ministry's Permanent Secretary.

In the private sector, Matambo has held senior positions at the World Bank, De Beers, Debswana and Lobatse Clay Works. He was also a Bank of Botswana Director. However, it is in his last role as the Managing Director of the Botswana Development Corporation (BDC), that Matambo gained a reputation for a dynamic management style, characterised by winning strategies and steady returns to government. From 1998, Matambo steered the BDC into record profits, introducing a range of products, keeping abreast with cutting edge Information Technology and ushering in a strong corporate governance ethos through the Board Charter. Under his guidance, the BDC has stretched its reach, deep into the local private sector, driving diversification and employment creation across previously unexplored industries.