05 Dec 2016

The President, Lt Gen. Dr Seretse Khama Ian Khama, says the overall budget for 2015/16 financial year was a deficit of P6.3 billion, which was higher than the projected P4.2 billion.  

Delivering State-of-the-Nation Address in Parliament on Monday (December 5), President Khama said this was an unfortunate necessity, as deficits should be avoided given their potential to erode the foreign exchange reserves as well as impact negatively on international sovereign credit ratings.

“Government can therefore not sustain such unbalanced spending, which we will do as a last resort only under exceptional circumstances,” he said.

The President said Botswana’s prudent macro-economic management continued to garner international praise for buttressing financial growth and sustainability.

“In April, Moody’s Investors Services affirmed Botswana’s “A2” sovereign credit rating,” he said.

He said Moody’s analysed Botswana’s credit profile as still stable in the context of the shock to the economy caused by low copper and nickel prices, as well as stability in the demand for diamonds.

Meanwhile, President Khama said Botswana experienced a trade deficit of P9.7 billion in 2015, resulting in a 2015 deficit of P57 million in the balance of payments, compared to a surplus of P11.4 billion in 2014.

Total exports for 2015 were valued at P63.4 billion, against P76.2 billion in 2014, representing a 16.8 per cent decrease in exports, mostly due to a fall in the demand for rough diamonds.

Total imports increased by 1 per cent, recording P73.2 billion in 2015 from P72.4 billion during 2014.

“Consequently, the trade balance was in a deficit of P9.7 billion in 2015, resulting in a 2015 deficit of P57 million in the balance of payments, compared to a surplus of P11.4 billion in 2014,” he said.

President Khama said as at August 2016, foreign exchange reserves were valued at P83.1 billion, equivalent to 18 months of import cover.

“Of these reserves, the Government Investment Account amounted to P33.8 billion,” he said.

The president said the goal of the government’s exchange rate policy is to support competitiveness of local industries hence it is important to maintain a stable rate of exchange for the Pula against the basket of currencies of Botswana’s major trading partners.

“However, volatility of the Rand had, as of August 2016, resulted in an annual 2.8% depreciation of the Pula against major currencies that make up the IMF Special Drawing Rights,” he said. ENDS