Finance and Economic Development minister, Thapelo Matsheka says government now expects the economy to shrink by 13.1% this financial year, the worst performance according to available records, on an annual basis.
Should the projection be realized, 2020/21’s contraction will be worse than the 7.7% witnessed in 2009 when the global recession pounded the local economy at one point forcing diamond production to stop. Government’s forecast for 2020/21 is worse than the IMF’s recently released projection of -5.4% growth.
From an initial forecast of 4.4% growth for this year, Matsheka laid out a depressing chain of revisions to the budget and the broader economy, in a televised briefing this afternoon.
“Most of the impact is on the mining sector, particularly diamond mining because buyers can’t come and see the stones to purchase them.
"In February at the budget I said it would not be business as usual. Now we are looking at business unusual," he said.
According to Matsheka, the mining sector, the country’s economic backbone, would drop by 33%, while the hotels and restaurant sector would drop by 32.2%. Manufacturing will drop by ten percent.
From an initial deficit of P5.2bn, government now expects a shortfall of P10.8bn for 2020/21. Revenues have been revised downwards from P62.4bn to P48.8bn while expenditure has been shaved to P59.6bn from P67.2bn.
Mineral revenues are now expected to
"We will not be able to effect the promised public service wage increase and we're also cutting conferences, international travel and other expenses,” Matsheka said.
"We have to reprioritise our spending and certain projects will not be done this year.
"Everyone is looking at for help, even those citizens who were self employed before. We have to cut back on the things we wanted to do.”
Funding to parastatals and councils will also be reduced, as government focuses on tiding the economy through the Coronavirus pandemic.
Government plans to finance the budget shortfall by possibly expanding its domestic borrowings, which are currently set at a ceiling of P15 billion. Matsheka said the Bank of Botswana and the ministry had submitted a proposal to President Mokgweetsi Masisi on the expansion.
Government could also tap into the credit being available by entities such as the IMF and others, although Matsheka stressed that such funding would go towards developmental needs that have been impacted by the pandemic, rather than recurrent spending.