Anyone who listened to Minister of Finance Ndaba Gaolathe’s statement in Parliament last year, on the state of the public coffers would have bet with their lives that the 2025–2026 budget would be a lean affair compared to the historic P102 billion spending splash by former minister Peggy Serame for the 2024–2025 financial year. Instead, Gaolathe plans to spend P97 billion in the upcoming financial year, P4 billion more than what the Finance Ministry expects will spent when the 2024–2025 financial year ends on March 31.
In other words, the P102 billion budget approved last February was not spent and instead, the latest estimates is that by March 31, the actual spending will have reached P93.4 billion. Gaolathe is proposing to spend P97 billion by comparison.
The numbers are raising questions about what forced the minister’s foot to push down the pedal on the budget at a time when the country is facing falling revenue figures and an uncertain recovery from diamonds.
Delivering his maiden budget speech on Monday, Gaolathe buttressed that he stands by his earlier Parliament statement, where he relayed the gravity of the fiscal cliff the country finds itself on.
“I stand by my December 2024 Parliament Statement on public finances that the state of our public finances, by any standards, is in an undesirable place,” he said.
“I highlighted the economy’s severe fiscal constraints, declining government revenues, as well as slow and jobless growth,” he added.
“To be clear, we inherited a government machinery plagued by deeply entrenched systemic inefficiencies that have crippled progress and development.”
Despite bellowing acknowledging how dire the situation is, the minister was forced to lift spending to P97.6 billion against receipts of P75.5 billion leaving a massive deficit of P22 billion, one of the country’s worst since Independence.
On Wednesday, two days after the budget speech, former Bank of Botswana deputy governor and prominent economist, Keith Jefferis, was blunt: the Minister of Finance and the budget plan clearly failed to stop the bleeding.
Speaking at the First National Bank Botswana budget review, Jefferis said the budget revealed on Monday sets the fiscus on a risky path of spending and one which is based on precarious and overly optimistic revenue forecasts.
“When you look at the budget you can see that the bleeding has not stopped,” he said.
“There are some costs that have been inherited from past budgets that could have been cut out.”
The economist argued that government has staked its bets on a recovery in diamond sales, even though De Beers, the major producer, plans to cut output this year.
“One of the concerns in this budget is that government expects to earn P15 billion from mineral revenues, figures which are more optimistic than what De Beers itself expects to make,” he said.
For 2025, De Beers has revised its production guidance downwards to 20–23 million carats, from a previous forecast of 30–33 million carats. The company remains focused on managing cash flow, reducing inventory, and adjusting production in response to prevailing market conditions.
Analysts have said in producing the budget, it was obvious that government could not ignore the political pressure to deliver on its campaign trail promises. The Umbrella for Democratic Change (UDC) had promised a string of increases in social allowances to the downtrodden members of society in line with its social justice principles.
Debates in the public sphere have been applying pressure on the UDC-led government to start delivering on its manifesto promises, but the calls come at a time when the budget cannot accommodate them.
From the spending forecast, it appears politics prevailed over the fiscus.
“Batswana were supposed to give the minister wiggle room to balance the sinking ship of the country’s finances then allow him to pan out his economic magna carta,” an analyst told Mmegi this week.
“Further pressures on the budget through unproductive expenditure may not be ideal in the long run.”
Estimates released by Econsult, the firm founded by Jefferis, suggest that due largely to the diamond downturn, government is incurring a P2 billion budget shortfall every month.
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.
The spending cuts expected in the Monday budget speech, have long been urged by economists, analysts and other authorities, as essential for the country to return to fiscal stability.
The International Monetary Fund (IMF) in an array of studies and reports over the years on the Botswana economy, has pointed out the need to slash the public wage bill in order to rebase it in accordance to levels manageable by a growing economy like Botswana. In its 2024 article on Botswana, the IMF said the country’s fiscal buffers and declining revenue were huge push factors for government to act on the unsustainable wage bill. “The budget balance has shifted from a surplus of more than 12% of GDP in FY2006/07 to deficits averaging five percent of GDP over the past five years. Indeed, total revenues have fallen from more than 40% of GDP in 2007 to 28% of GDP in 2023.
“Half of this decline reflects falling mineral revenues, but both non-mineral and South African Customs Union revenues have also fallen.
“Government spending, however, has kept pace with GDP, averaging 34% of GDP over the past 10 years.
“The public sector wage bill is high by international standards, at 13% of GDP,” researchers at the IMF noted.
A year prior in its 2023 article on Botswana’s economy, IMF researchers echoed the same worry over the wage bill, citing its size as a threat to a sustainable fiscal stance.
