Matambo's budget: some lessons from the bible

In the book of Genesis it is said that the first economist appeared. In the bible there is a famous passage about Joseph who was brought before the Egyptian Pharaoh to interpret a dream that none of pharaoh's advisers could understand. In the dream pharaoh saw seven fat cows and then seven lean and hungry cows. Joseph developed, on the basis of Pharaoh's dream, what economists now call the 'Kuznets cycle' which says that economies followed 15 year cycles.

The seven fat cows meant harvests would be good for seven years and that this would be followed by seven years of bad harvests. Joseph advised pharaoh that what needed to be done was to preserve a 20% share of the nation's grain in preparation for the bad times. Pharaoh appointed Joseph to oversee what was the world's first documented sovereign wealth fund, where wealth from today is stored for the future. Non-economists joke that in over 3,000 years since Joseph, economists have still not developed more scientific or accurate methods of prediction than Joseph's reading of pharaoh's dream.

The biblical parallel to Botswana's budget and its current situation could not be more pointed. The Minister of Finance, Kenneth Matambo presented a budget this week that few could possibly challenge - the budget was balanced, there was a small surplus and there were no tax increases. What more could one reasonably ask?Botswana remains with a public debt of just 23% of GDP, the envy of many heavily indebted countries in Europe or North America where debt as a percentage of GDP is in many cases well over 100%.  The only tax measure introduced by Matambo was in effect a decrease in taxes with taxes on interest income earned from savings was set at a final rate of 10%. Of course this is cold solace for savers as commercial bank deposit rates are so low in Botswana, well below the rate of inflation and anyone who saves their money in a bank gets poorer, in real terms, every year. It would of course have been better had Governor Linah Mohohlo used her considerable powers of persuasion on the commercial banks to raise deposit rates so that savers have some incentives to save rather than buy cars and more consumer goods.

Editor's Comment
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