01 Feb 2021

The 2021/2022 budget presents an unsustainable fiscal trajectory as reflected in the budget deficit.

The total revenue and grants projected for current fiscal year 2020/21 are expected to be P48.33 billion in the revised budget, below the original budget of P62.39billion.

When delivering the 2021 budget speech, Minister of Finance and Economic Planning Minister, Dr Thapelo Matsheka said the decrease was largely due to the near collapse of mineral revenues.

On one hand, he said the revised budget for customs and exercise showed an increase of P1.12 billion, from P15.38 billion to P16.50 billion, while VAT decreased from P8.55 billion to P7.1 billion.

Projected non-mineral income tax revenue had also been revised downwards by P2.37 billion, reflecting tax deferment concessions granted to alleviate the impact of COVID 19.

A once-off event of increased revenue from P1.16 billion to P4.12 billion was also experienced due to increase in Bank of Botswana’s net income tax in 2019 not indicating a sustained increase.

Dr Matsheka said total expenditure and net lending for 2020/2021 was projected at P69.36 billion against the original budget of P67.62 billion. This includes P57.20 billion for recurrent expenditure both ministerial and statutory, while P12.23 billion was for development budget.

Furthermore, Dr Matsheka stated that the scenario would result in a revised budget deficit of P21.03 billion or 11.06 per cent of the GDP in 2020/21.

“This represents an extremely serious deterioration in our fiscal position and has resulted in a rapid depletion of government accumulated savings in the government investment account, and an increase in borrowing through the bond issuance programme,” he said.

He said a trend in the overall fiscal position was not sustainable and it was essential that it was revised in the 2021/22 financial year.

Meanwhile Dr Matsheka said  the financial year 2019/20 had experienced deterioration in the budget due to underperformance of total revenues and grants.

He said the overall budget for 2019/20 had a deficit of P11.10 billion or 5.6 per cent of the GDP compared to a projected deficit of P7.93 billion in the revised budget.

He noted that the deterioration in the budget amounted to P54.30 billion or 10.56 per cent below the revised budget figure of P60 71 billion.

Dr Matsheka further stated that while recurrent budget was largely in line with the revised budget, development expenditure underperformed by P3.39 billion.

“However the underperformance of the development budget was outweighed by that of revenues, resulting in a significantly larger deficit than originally budgeted,” he stated. ends