For the financial year 2024–2025, government had planned to spend a record P102.3 billion against revenues of P93.6 billion. The downturn in diamonds has meant that revenues have missed their forecasts by a wide mark, whilst the cutback in spending to limit the deficit, has been insufficient.
In an economic update covering the fourth quarter of 2024, Econsult, a firm led by former Bank of Botswana deputy governor Keith Jefferis, estimated that government was incurring a P2 billion shortfall every month due to the squeeze on main revenue drivers this year.
By Econsult’s estimates, government is meeting only half of this shortfall through the monthly domestic capital market borrowings conducted by the Bank of Botswana.
“Clearly, what happened was that the massive shortfall on mineral revenues, leading to an overall revenue shortfall of 17%, was not matched by spending cuts, which have only been reduced by a projected six percent,” the consultancy firm stated. “Hence the deficit blowout and serious liquidity problems in government, which has struggled to make some payments as they fell due.”
The economic update continued: “The immediate challenge is to 'stop the bleeding' and make sure that government is still able to meet critical spending needs, such as paying salaries.”
To curb this, researchers at Econsult have called on the new administration to immediately halt expansionary expenditure in an effort to stabilise the economy.
“Essentially, the government revenue generation and spending need adjustment – up and down respectively – to move the overall fiscal balance to a level that is sustainable in the long term. “What that means in Botswana’s case is that there should be a budget surplus generated to enable the restoration of fiscal savings to absorb shocks and cushion the adverse fiscal impact of the depletion of our diamonds. “The need for fiscal consolidation should be one of the central messages of the 2025 Budget,” the researchers noted.
Possibilities for spending cuts include reducing subventions to local authorities, means-testing tertiary education sponsorships, reviewing the public service wage bill and revisiting the decision to buy shares in HB Antwerp, the latter having previously been allocated nearly P1 billion in the current financial year.
Econsult further recommended the disposal of some government assets through the reform of state-owned entities. The assets suggested range from the Botswana Meat Commission to Air Botswana, as well as others such as the Botswana Telecommunications Corporation and Botswana Vaccine Institute, where government could sell all or part of the equity it holds.
