Gov't in talks for $600m debt from int'l lenders

Economic backbone: Major road and rail projects are among those approved for NDP 11
Economic backbone: Major road and rail projects are among those approved for NDP 11

The Ministry of Finance and Economic Development is in talks with international lenders for a $600 million (P6.7 billion) loan intended to finance and support projects under NDP 11, with plans to tap into the funds before the end of the year.

A Request for Financing Proposal (RFP), which was sent to international commercial banks has reportedly elicited interest and talks are ongoing, BusinessWeek has learnt.

“Any firm proposals for borrowing will be presented to Parliament for approval as per the Public Finance Management Act,” Finance and Economic Development minister, Peggy Serame told BusinessWeek.

She explained that the proposed facility would be guaranteed by the Multilateral Investment Guarantee Agency (MIGA), a World Bank institution that offers political risk insurance and credit enhancement guarantees.

“The Request for Financing Proposal was closed in January 2021, which was sent to international commercial banks to source funding. “This is a facility which will be guaranteed by MIGA and therefore assist in extending tenor and possibly lower the cost of borrowing,” Serame said.

According to the RFP, sourced by BusinessWeek from the ministry’s website, the government is looking for $600 million or €500 million in debt “for the purpose of financing the development of new infrastructure projects as well as to refinance recently completed projects financed out of the general government budget”.

The RFP indicates that the projects may include recently-completed projects, ongoing projects, and projects that are to commence during the final two years of NDP 11, which are 2021-2022 and 2022-2023.

It is expected that not more than 50% of the total facility will be used for the refinancing of project expenditure already undertaken, the RFP reads. Refinancing is the replacement of an existing debt using another debt with terms and/or conditions that are more favourable.

In the RFP, the ministry says it is seeking a repayment period of up to 15 years, competitive rates and terms and a first drawdown of the debt in mid-2021. “The funding proposals will be evaluated by an appropriately qualified and constituted evaluation panel of government officials,” the RFP reads. “The appointment of the preferred lender will be subject to the approval of the Minister of Finance and Economic Development and the Parliament of the Republic of Botswana in accordance with statutory requirements.”

The international RFP comes as the government finalises a $250 million loan from the World Bank, which is expected to support the Economic Recovery and Transformation Plan in areas such as strengthening of the social protection system in the event of future shocks, supporting SMMEs’ access to finance and speeding up the country’s transition to a green economy.

Serame told BusinessWeek the African Development Bank had also been approached and had indicated willingness to assist the government with budget support financing.

Botswana has one of Africa’s highest sovereign credit ratings, and low external debt as it has been able to rely on savings from diamond earnings.

However, COVID-19 spending last year eroded the government’s reserves, while the poor response to the P30 billion domestic debt programme has also made the need for external funding more urgent. The fiscus is facing a P6 billion deficit in the current financial year, after an estimated P14.5 billion shortfall last year.

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