The Ministry of Finance has revealed its urgent need to rebuild fiscal cushions, as the low levels of financial buffers have left the economy vulnerable to different shocks and risks.
Vice President Ndaba Gaolathe told the recent Budget Pitso for general stakeholders that the next budget, which is expected to be delivered next month, will focus on rebuilding the strength of the country’s financial buffers. “The 2025/2026 budget will prioritise several critical areas, including the need to rebuild fiscal buffers to protect against future economic shocks, strengthen domestic revenue mobilisation to lessen reliance on external funding,” he said. Financial buffers are often government funds saved and kept in offshore accounts as rainy days insurance for government. They are usually part of government's share of the Government Investment Account (GIA) or in the case of other countries’ sovereign wealth accounts.
The GIA, which is managed by the Bank of Botswana and represents government’s share of the Pula Fund, is an asset generally unknown by most outside the finance and banking sector. It sank further to P1.25 billion in September 2024, compared to a figure of P12.5 billion in September 2023. Government often dips into the GIA to fund various needs such as the 2016 Economic Stimulus Plan and budget shortfalls. Frequent withdrawals from the Pula Fund are also made to support the country’s import bill. Gaolathe and his technocrats are hammering out a tough 2025-26 budget, which is expected to carry a P11.4 billion deficit. The current financial year, which ends on March 31, is expected to show a shortfall of P18.6 billion, higher than even the COVID-19-hit year of 2020-21, which produced a P16.4 billion deficit.
Speaking at the Budget Pitso held for Local Authorities last week, Gaolathe, who is also the Finance minister, said government’s focus was on prioritising its spending to both reduce expenditure and foster growth. “As we move forward, we need to recognise and prioritise fiscal consolidation plans that effectively support the broader goals of economic growth, diversification, sustainability and progress for all,” he told the gathering. “The core of this agenda is our determined efforts to rebuild our fiscal buffers and establish robust spending management and practices.” Late in December, the Vice President told a youth Budget Pitso that going forward government would have to reduce the civil service wage bill and also cut grants and subventions to local authorities and parastatals, as a way of slowing down government spending and boosting savings.
He also said government intends to boost domestic resource mobilisation efforts, an effort that usually includes broadening the tax base and tightening revenue collections, while also enhancing spending discipline and seeking new engines of economic growth.