31 Jan 2021

Minister of Finance and Economic Development, Dr Thapelo Matsheka is expected to deliver the 2021/22 budget speech today amidst economic uncertainties cause by the COVID-19 pandemic. 

In his forecast, University of Botswana public administration lecturer Dr Emmanuel Botlhale says Batswana should brace themselves for difficult times as government pursues revenue generation avenues. 

The local economy has been hit hard by the effects of coronavirus mostly as a result of last year’s   lockdown.  

According to Statistics Botswana the economy declined by 24 per cent in the second quarter and six per cent in the third, signaling marginal recovery as economic activities resumed. 

With the economy having declined in the second and third quarters of 2020, the country can therefore be said to be experiencing economic recession.

 The 24 per cent decline recorded in the second quarter has been described as the worst since independence. 

These scenarios coupled with the dwindling foreign reserves plus budget deficit, mean there will be belt tightening, Dr Botlhale says. 

This, he says, means Batswana may find it difficult to access government services as the recurrent budget  reduced and the  much needed developments did not materialise. 

There are two ways which  government can use to maneuver through the difficult economic climate, fiscal or monetary. 

Through the fiscal route, government can inject economic activity through expenditure, but given dwindling revenues, this is impossible. 

Noting that budget deficits had accumulated to P13 billion since the 2008 global economic meltdown, Dr Botlhale says government is therefore unlikely to choose the fiscal  route. 

Last year government introduced revenue generation measures including increment of levies, increasing Value Added Tax (VAT) to 14 per cent and efficient tax collection. 

However, this route may be detrimental to the lives of Batswana, some of whom are burdened by the effects of COVID-19.

 Dr Botlhale says government should spread its social safety net to accommodate everyone in need of assistance.  

On the monetary route, Dr Botlhale says Bank of Botswana had constantly reduced the bank rate which should keep the cost of borrowing low. 

When interest rates are low, businesses can get loans to expand at affordable rates, explains Dr Botlhale. 

Turning to the deficit issue, which means government spends more than available in its coffers, Dr Botlhale says there is need to tread carefully. 

Warning that two-thirds of the budget spent on recurrent budget is not sustainable, he says it should instead go towards the development budget which gives return on investment. ends