19 Sep 2013

Public debt management faces administrative and not legal challenges, the Public Accounts Committee (PAC) has been told.

Briefing the PAC on September 18, Permanent Secretary in the Ministry of Finance and Development Planning Mr Solomon Sekwakwa said capacity problems needed to be solved, adding there was no need to consolidate all legal instruments. He explained that the Constitution, Stock Bonds and Treasury Act and Finance and Audit Act set the legal framework on the amount of debt government could take.

Mr Sekwakwa said given this scenario, they had embarked on coming up with a strategy that would help them manage debt. The strategy would be in place by March next year. He further said they had units under the development section that dealt with debt. These included such accountants who recorded and monitored payments.

The permanent secretary however said they did have challenges in terms of capacity, adding they could not have a fully-fledged department since creation of new posts had been frozen as the government embarked on right sizing the public service.

He however said the current teams were performing well. Mr Sekwakwa told PAC that they did not have debt management problems until 2008 when the government took a US1.5 billion loan from African Development Bank which increased their portfolio. He further said the government had introduced bonds and treasury bills in an effort to increase the capacity of capital markets.

According to the available legal institutions, external and internal public debt cannot exceed 20 per cent of GDP, meaning the total ceiling was set at 40 per cent of GDP. He further said any activity should be contained in the development plan and be approved by parliament. Mr Sekwakwa said some people were of the view that the 40 per cent ceiling was too restrictive and their argument had been that Botswana’s economy was fragile and therefore needed a bigger cushion.

He said if there were shocks in the economy it might not be noticeable. He gave as an example the slump in diamond. As such he was of the view that the law is fine but administrative issues had to be addressed. The PS said government borrowed from organisations with reasonable terms and generally for investment. He however said government was not only looking at monetary returns but also social returns. He further said under the law, money meant for a project could not be diverted as even the lenders specified that.

Meanwhile according to the information contained in the Auditor General’s report, external public debt in 2011/12 financial year stood at 18.93 per cent of GDP while the internal debt stood at 8.645 per cent of the GDP. ENDS