Govt revises GDP forecast to 7.9 percent

Brian Benza
Staff Writer | Tuesday October 19, 2010 00:00

 

According to the 2011/12 Budget Strategy Paper (BSP) that will form the basis of preparations for the next national budget to be announced next February, the government has revised GDP, revenue and expenditure forecasts for the next three years, laying the foundation to attain the target of a balanced budget by the year 2012/13.

Announcing the 2010/11 national budget early this year, the Minister of Finance and Development Planning (MFDP), Kenneth Matambo, put this year's growth forecast at 5 percent. The government has now adjusted the figure upwards to 7.9 percent due to improved revenues forecasts and trimmed expenditures.

Confirming the adjustment to Mmegi in a telephone interview yesterday, the Secretary for Economic Affairs at MFDP, Taufila Nyamadzabo, said following the improvement in diamond production, the government now expects GDP growth and revenues to be higher than initial forecasts.

'On one hand, our revenues will be higher as Debswana now expects to produce about 23 million carats this year from an initial forecast of 20 million,' Nyamadzabo said. 'On the other hand, our expenditures will be contained due to under-spending as well as expense prioritisation.

'This should also see our budget deficit forecast come down from over P12 billion to just above P9 billion. But this is not to say things are fine now. We are still a long way from the normal (because) we never used to have deficits of such margins.'

A P12.12-billion budget deficit was forecast this year, much of which was to be financed by borrowing from the domestic sector through a bond issuance. However, the government has had to defer the bond after managing to cut down its expenditure and ramp up revenue collection.

Last month, the IMF also announced that it had revised upwards to 8.4 percent its projections for Botswana's GDP from the 6.3 percent it had forecast in the World Economic Outlook April report. Based on a stronger performance by the mining sector - particularly diamonds - the IMF also trimmed its forecast for Botswana's budget deficit this year from the government's projections of 12.2 percent to 6.4 percent.

Consultations are already underway for the preparation of next year's national budget. To that end, the government will hold a Budget Pitso next week where the 2011/12 Budget Strategy Paper will be used as a guide for required reforms in public financial management.

Although this year's pitso is part of a wide campaign by the government for each sector to hold its own pitso, Nyamadzabo says they will use the conference to cast their consultations net wider following complaints by some sectors in previous years of the government's lack of consultations in the budget planning process.

This Budget Pitso comes at a time when significant reforms in the budget-making process are underway as the government tries to meet the demands of a changing economic environment. The critical changes expected in the next fiscal year include a measurable slashing in expenditure levels deemed unsustainable in the long run as diamond revenues are expected to significantly fall in the next seven years.

Government says while the recession imposed an obligation on them to maintain high levels of expenditure in a bid to maintain economic activity, going forward, the focus will shift to prioritised value-adding expenditure as well as improved means of revenue collection.

'There is need to improve the quality of expenditure,' reads the BSP. 'Any growth in recurrent expenditure should be critical, well-thought out and justified.

'The development budget should, as a first priority, be allocated to completing ongoing projects. Where priorities have changed, it should be clear which projects would be forfeited or suspended.'

Government also says it will start providing stakeholders with one to three-year fiscal projections to guide the budget in a bid to determine the path of total spending consistent with the medium  and long-term objectives of fiscal sustainability.