Supervision key to success of the package Economists


The current economic challenges needed bold action, but President Ian Khama’s surprise Economic Stimulus Package (ESP) will only bear fruit if the quality of spending, including project supervision improves, economists are agreed.

Botswana is currently faced with a high unemployment as well as elevated inequality and poverty rates that are   not consistent with her upper middle-income status.

Whilst news of the stimulus package marked a conspicuous change from previous budget guidelines of restricting spending only to on-going and high impact projects, economists say the package will help ease the prevailing economic headwinds only if there is a radical change in monitoring and implementation of projects.

“While there is no detailed information about the magnitude, cost and timing of the programme, I certainly believe the current state of the economy requires action to be taken, given challenges such as the high rate of unemployment etc. And additional spending will have a short-term benefit in terms of increasing demand,” said prominent economist, Keith Jefferis.  

He continued, “The question is whether there will also be attention paid to longer-term structural issues, such as improving the efficiency and effectiveness of government spending programmes, and enhancing the business environment. Additional spending will only help to transform the economy if these issues are also dealt with”.

According to Khama, government will draw down on foreign reserves to fund the new projects, which range from construction, manufacturing, agriculture and tourism.

As at July this year, the Botswana government had some P43 billion in deposits at the Bank of Botswana (BoB) and it is able to draw down on these resources to fund the additional spending, if it results in a budget deficit. 

While government has invested substantially in major developmental projects across the country, the quality of the spending has often come into question with poor implementation and monitoring blamed for delayed and non-delivery of projects.

“Public project implementation has a chequered history in Botswana, hence, one can only hope that there will be stricter monitoring and control of project implementation. With the right amount of control, the increased expenditure should translate into more economic growth and job creation also help the economic diversification efforts,” said public finance expert at the University of Botswana, Professor Emmanuel Botlhale.

Botlhale was however quick to caution against haphazard withdrawals of the reserves as the Botswana economy is still very much susceptible to the current headwinds faced by the global economy.

Due to the uncertainties in the global economy, and in particular the diamond market, the 2015 economic growth forecast has been halved while this year’s budget has slipped into a P4.03 billion deficit from an earlier projected surplus of P1.2 billon.

“Foreign exchange reserves is not money lying around to be used for anything but, rather, it is primarily used as an import cover. Therefore, the government must exercise extreme caution if it decides to dissave or draw down from the reserves. Currently, the reserves can only provide an 18-month import cover, therefore, extreme caution must be exercised lest the draw down leaves the economy exposed to the vagaries of the international global markets such as a global economic crisis which crisis may befall us any time given uncertain forecasts of the global economy,” Botswana added.

Economists have previously also said there is an increasing need to formulate rules on the use and management of the country’s reserves in the Pula Fund as revenues from diamonds are gradually diminishing.

In a previous economic report Jefferis said what was needed at the very least was some public debate on what the purpose of the Pula Fund and government’s savings should be. “Are they simply for budget and balance of payments stabilisation purposes, or are they intended to accumulate financial assets to be bequeathed to the future?” he asked.

Editor's Comment
What about employees in private sector?

How can this be achieved when there already is little care about the working conditions of those within the private sector employ?For a long time, private sector employees have been neglected by their employers, not because they cannot do better to care for them, but because they take advantage of government's laxity when it comes to protecting and advocating for public sector employees, giving the cue to employers within the private sector...

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