With a total budget of P97.61 billion, a swelling deficit of P24.7 billion, and total public debt now at P74 billion (25.75% of GDP), the country stands at a crossroads.
The lingering question in the minds of many is ‘how is the deficit going to be financed?’ Debt is one option. Debt, in itself, is not inherently bad—what matters is how it is used. If borrowed funds are directed toward productive investments such as infrastructure, energy, and industrial development, they can stimulate economic activity, create jobs, and enhance long-term growth. The challenge, however, is ensuring that borrowed resources are deployed in a manner that generates a return on investment.
Minister Gaolathe’s emphasis on domestic resource mobilization and the expansion of the local bond market is a step in the right direction. The government’s P55 billion Bond Issuance Programme aims to deepen the domestic capital market, providing investment options for pension funds and other institutional investors. This approach aligns with global best practices, as successful economies leverage debt to finance transformative projects that improve economic resilience and competitiveness.
However, borrowing becomes a problem when it is used to finance recurrent expenditure—salaries, subsidies, and welfare programmes—without corresponding revenue growth. In Botswana’s case, the recurrent budget (P72.61 billion) is more than three times the development budget (P23.75 billion). This imbalance raises concerns about sustainability and economic efficiency.
A recurrent budget that dwarfs development spending signals a country living beyond its means. Botswana’s current fiscal structure means that a large portion of government resources are consumed without yielding economic returns. The Government Investment Account (GIA), which was once a robust financial buffer, has plummeted from P18 billion before COVID-19 to a mere P2 billion today. Additionally, foreign exchange reserves have declined from P84.9 billion in 2015 to P53.6 billion in late 2024. These indicators highlight the urgent need for fiscal restructuring.
The International Monetary Fund (IMF) and World Bank have long recommended rationalising Botswana’s bloated civil service. While the government has signalled intent to review state-owned enterprises (SOEs), history suggests that meaningful reform is often delayed. Past administrations made similar commitments but failed to act decisively. Minister Gaolathe’s government now has an opportunity to follow through with necessary restructuring—whether through mergers, privatisation, or efficiency improvements in public institutions.
Botswana’s debt-to-GDP ratio remains within the statutory limit of 40 percent, but this threshold is not sacrosanct. Many countries operate with debt levels exceeding 100 percent of GDP, provided they have clear repayment strategies and use funds prudently. If Botswana can present a compelling case for increasing the debt ceiling—anchored in targeted infrastructure investment, economic diversification, and job creation—Parliament should consider such a move. However, any upward revision of the debt ceiling must be accompanied by fiscal discipline and transparency to avoid unsustainable debt accumulation.
Botswana’s fiscal challenges are not insurmountable. The key to long-term stability lies in shifting from recurrent-heavy spending to investment-driven budgeting – A more balanced approach to budgeting is required, where development expenditure is prioritised over administrative costs.
The new administration does not have a choice but to reform state-owned enterprises. Cutting inefficiencies in parastatals can free up significant resources that can be redirected toward productive sectors.
As Gaolathe indicated in his budget speech, revenue mobilisation must be strengthened. The government should broaden the tax base, enhance compliance, and explore alternative revenue sources to reduce overreliance on mineral exports.
Finally, public debt management must be enhanced. Borrowing should be strategic, transparent, and directed toward projects that will yield measurable economic returns.
Minister Gaolathe’s budget acknowledges Botswana’s fiscal challenges, but policy execution will determine whether the country navigates its way out of a looming fiscal crisis or sinks deeper into unsustainable deficits. The time for bold, decisive action is now.
