03 Feb 2020

Government will  refocus its attention to agriculture and manufacturing sectors as they have the potential to boost economic growth, promote exports development and reduce poverty.

Minister of Finance and Economic Development Dr Thapelo Matsheka said, when delivering the 2020/2021 Budget Proposals speech yesterday, that the transformation programme required a review of the country’s entire ecosystem for promoting exports, fiscal incentives and provision of basic infrastructure.

“In this connection, a review of programmes and subsidies will be performed to align them with the transformation agenda and ensure that they contribute to greater private sector participation.

While the economy registered growth of 3.6 per cent in 2019 and is expected to reach 4.4 per cent in 2020, Botswana has experienced trade deficits as there were more imports than exports.

Dr Matsheka said the preliminary balance of payments for 2019 indicated a deficit of P10 billion, following a lesser deficit of P4.2 billion in 2018.

“Therefore, more needs to be done to promote the growth and diversification of the country’s export base and this will be intensified, focusing on agriculture and manufacturing value chain.

The minister said measures would be required to reduce imports through the implementation of a robust import substitution strategy.

He said Botswana imports most of its requirements, including basic products that did not need huge investment to produce locally.

Dr Matsheka said the government’s purchasing power, through the Economic Diversification Drive (EDD) and other citizen empowerment initiatives would be used to reduce the import bill.

“It is only through a deliberate and vigorous implementation of the Export Strategy and Import Substitution Strategy that the country can restore its external balance and create the jobs that are required in an inclusive economy, in which Batswana are major players,” he said.

Botswana’s negative external balance has undermined the growth of its foreign exchange reserves.

He said as at the end of November last year, foreign reserves amounted to P70.6 billion, a decrease from P74.5 billion in November 2018.

However, of the total amount of P70.6 billion, Government Investment Account stood at P16.3 billion, compared to P26.7 billion in November 2018, indicating the impact of government spending on the foreign reserves.

Meanwhile, the minister said Bank of Botswana’s monetary policy remained accommodative during the past year as inflation was within the central bank’s medium-term objective range of three to six per cent.

He said the outlook for domestic inflation was stable due to moderate domestic demand pressures and modest increases in imported inflation.

This, Dr Matsheka said required efficient public spending to spur private sector-led growth, which was fundamental to getting the economy to operate at full potential.

The Pula has performed consistently and the minister said this was achieved through the operation of a basket mechanism, wherein the main variables were currency weights and a rate of crawl.

He explained that the currency basket weights were based on the country’s trade pattern while the annual rate of crawl was based on the projected inflation between Botswana and its major trading partner countries.

Dr Matsheka said these parameters were reviewed annually to maintain a competitive exchange rate environment to support the transformation agenda, rather than an act of devaluation or revaluation of the exchange rate. ENDS