02 Feb 2020

Minister of Finance and Economic Planning Dr Thapelo Matsheka will today present the 2020/21 National Budget, which is expected to run on a deficit, the second since the beginning of the National Development Plan (NDP) 11. 

Currently, the 2019/20 national budget is running on a deficit, which was anticipated at P7.34 billion, but later ballooned due to salary increments awarded to public officers and adjustment of salaries for members of the disciplinary forces.

 Expectations are that the 2020/2021 deficit will be less than the 2019/20. 

Following the national elections last year, all eyes will be on Dr Matsheka, who is still new into the seat as he draws the new government’s plan towards budget surplus and economic growth. 

A budget deficit occurs when government expenditure is greater than the money it makes. 

Speaking in an interview, Mr Moatlhodi Sebabole, First National Bank of Botswana (FNBB) chief economist said the deficit does not, however, result from stagnant economic growth, but rather the government spending more money than makes. 

He said government had set a deficit limit offour per cent of GDP and this had never been passed and expectations were that over the coming years, the deficit would constantly decline and eventually the country would experience a balanced and a surplus budget. 

Mr Sebabole, who is the Chairperson of the National Transformation Strategy Team, said given a deficit, government should be prudent in its spending and ensure only projects which offer return on investment were undertaken, unlike in the past when money was spent on failed projects such as the Palapye Glass Project. 

The budget deficit emanated from government’s expenditure against limited sources of revenue and Mr Sebabole said he was against the idea of raising tax, either income tax or Value Added Tax (VAT), saying they would hit an ordinary Motswana in the pocket and were therefore unsustainable, especially in a country with high levels of unemployment. 

He said instead of raising tax, Botswana Unified Revenue Services (BURS) needed to tighten its collection as it had been established that it under collected tax. 

Mr Sebabole said the country should lure investors as new industries come with employment opportunities, hence more tax payers. 

The deficit could be funded through either tapping into the foreign reserves or borrowing from local or international markets. 

Talking about the foreign reserves, he said the country’s foreign reserves were relatively higher than other countries, adding however that it should also be done in a sustainable manner to protect the economy from shocks, hence the establishment of the Pula Fund. 

Botswana also has a room through which it can borrow funds as its debt currently stands at 23-24 per cent of GDP, far lower than the 40 per cent set by the government. 

This means the country enjoys favourable credit rankings and can therefore negotiate for favourable loans, unlike when a country is looking for economic rescue.  

Mr Sebabole called for improvements in project-management to guard against cost over runs emanating from late completion of projects and also to ensure projects done were up to required standards. 

He expressed optimism that under President Dr Mokgweetsi Masisi, belts would be tightened as the President had launched a war against corruption as seen by the establishment of Ethics Committee and the Declaration of Assets and Liabilities Act. 

NDP 11 mid-term review will be held this year. ENDS