A statement from the World Bank says the loan is designed to strengthen COVID-19 pandemic relief while bolstering resilience to future shocks.
Government has finalised a US$250 million (P2.6 billion) loan with the World Bank to support the Economic Recovery and Transformation Programme (ERTP).
The P14.5 billion ERTP aims to lift the country out of COVID-19 induced economic weakness while transforming it along new priorities.
No details were provided on the loan’s duration, its interest rates or other conditions.
“The COVID-19 pandemic has placed a great burden on the country’s economy, its people, and firms,” said World Bank Country Director for Eswatini, Botswana, Lesotho, Namibia and South Africa, Marie Francoise Marie-Nelly.
“With this operation, the World Bank will support the government’s reforms to ensure social spending reaches the poorest and assists Batswana who are most affected by the Covid-19.
“This operation will also support reforms to attract private sector investments, contribute to diversification of exports, and increase job opportunities towards a green economy”.
The loan is Botswana’s first from the World Bank and a rare request for external budget support from government, which has traditionally funded deficits from its own reserves. However, COVDI-19 spending last year drained the country’s reserves, leading the government to open negotiations with the World Bank in January.
The 2020/21 deficit is estimated at P14.6 billion while the 2021/22 shortfall is expected to be P6 billion or about three percent of GDP.
Marie-Nelly said the loan was the first of two arrangements being finalised for Botswana. She did not give details on what the second funding arrangement would be.
Botswana last requested external budget support in 2009, when a US$1.5 billion loan was secured from the African Development Bank. Other support from external financiers has gone directly to certain projects or to parastatals, with government, in the case of the latter, underwriting the loans.