Within three months, new Finance Minister, Thapelo Matsheka will face the nation and explain how he intends to finance a deficit of P7.8 billion, the largest the country has suffered in at least 10 years.
Traditionally, finance ministers have a handful of choices to cover deficits. Dip into the country’s foreign reserves, borrow from supranational bodies such as the African Development Bank or borrow from the local capital market.
Each of those options has its own Ts and Cs. These include the interest rates offered, the impact on the pula’s value, the stability of public finances, possible violation of debt thresholds and other fiscal rules and others.
With the effects of the cumulative P16.1 billion deficits the economy has endured since the start of NDP 11 in 2017/18 still reverberating through the public finances, the task facing Matsheka is anything but cut and dry.
Ironically, his predecessor had a similar baptism of fire, coming in during the global recession and incurring a P9.5 billion deficit in 2009/10.
Where Matsheka departs somewhat from his predecessor’s predicament is the political pressure he is under to deliver his boss’ electoral promises, in particular ensuring that these are reflected in the upcoming budget.
As stated by President Mokgweetsi Masisi after the elections, the electoral victory arrived serendipitously at a time when the 2020/21 budget process is being finalised and presents an opportunity to immediately deliver on some of the targets of the ruling party’s manifesto.
Even as a seven-billion-headed beast approaches, Matsheka has to tackle the weighty promises Masisi made prior to October 23 which essentially revolve around “the twin problems of unemployment and poverty amongst our people in general”.
With a beast peering over his shoulder, how does Matsheka ensure budget priorities reflect the push to fight unemployment, poverty, create economic opportunities and improve public and private service delivery?
How does he make good on the pledge to boost spending on human capital development and tackle the mammoth task of a “knowledge-based economy” at a time when the downturn in diamond exports is nipping at his heels?
The new finance minister will surely look to greater efficiencies in public finance and the elimination of wastage as a priority. One of these areas involves the streamlining and audit of the numerous Special Funds, a task that Matsheka’s predecessor was busy with at the time of his exit.
The new finance minister will also want to send a
He may also however have to address greater cost recovery in the public service sector, which his predecessors have perennially kicked down the road. Finance sector technocrats recently said unpopular decisions in public spending were inevitable in the short to medium terms.
“We need to see other options of raising revenues including raising taxes which are the lowest in the region,” Finance Ministry deputy secretary for macroeconomic policy, Kelapile Ndubano told a recent budget pitso.“We are not saying we are looking at raising them now, but it’s an option that we may look at when it comes to that. “Also the fees and levies for public services will have to be looked at especially for greater cost recovery in services such as health and education.
“We need to be discussing these things to see how far we can go in terms of cost recovery.” With a bulging civil service wage bill, declining revenues and electoral promises to be met, one of those unfavourable decisions may come sooner rather than later for Matsheka. Revisions to taxes may have to be made early into his tenure, particularly the reduction of the range of tax exempt goods and subsidies.
Econsult managing director and former Bank of Botswana deputy governor, Keith Jefferis has his own thoughts on Matsheka’s priorities. Jefferis has previously spoken out against the proliferation of poorly managed special levies and on the tax base of increasing tax exemptions. “(His priorities include) finding ways of improving efficiency in government, improving value for money in government spending, coming up with new sources of revenue for government and resisting additional spending demands that threaten to make the budget deficit unsustainable,” he told Mmegi.
“He also has to reach agreement on a new medium-term deficit financing strategy.”
Matsheka, the elected Member of Parliament for Lobatse, will also be keenly aware of the expectations of an area that has skirted with ghost-town status for several years.
Unlike his predecessor who was specially elected, Matsheka has the additional duty of attending to his constituents’ challenges, all the while tackling a menacing beast while carrying the burden of imposing electoral pledges.