06 Feb 2022

While the 2021/22 budget was made under tough economic environment, this year optimism abounds as there have been signs of recovery. 

  “The negative impact of COVID-19 on the economy has been easing in recent months with an improvement of economic growth,” President Dr Mokgweetsi Masisi said in his State-of-the-nation Address last November.

  Saying the diamond industry had recovered since the last quarter of 2020 with the momentum maintained in 2021, Dr Masisi said the domestic economy had been expected to grow by 9.7 per cent last year.

  Given the foregoing, Batswana’s eyes will be glued to their television screens to hear what government coffers hold for them when Minister of Finance and Economic Development, Ms Peggy Serame delivers the budget speech this afternoon. 

When presenting the budget last year, then finance minister, Dr Thapelo Matsheka, indicated that revenues had declined as economic activity and incomes dwindled  while government expenditure increased due to the fight against  COVID-19 and the need to support firms and households. 

The minister said during the financial year, government allocated an additional P14.5 billion for the Economic Recovery Transformation Plan 

“The resultant budget deficits need to be financed, whether from domestic or external sources, while guarding against the risks of excessive debt accumulation,” he said. 

For the 2021/22 financial year which ends March 31, Dr Matsheka had proposed a total budget of P70.61 billion against revenues and grants valued at P64.58 billion resulting in a P6.03 billion deficit equivalent to 2.87 per cent of Gross Domestic Product (GDP). He had also proposed a recurrent budget of P50.66 billion against a development budget of P14.75 billion. Expressing concern over the budget, especially on the difference between the recurrent and development allocations,  Dr Matsheka had warned that it would not be business as usual.

Another area of major concern was a 72 per cent decline in foreign reserves between the end of 2019/20 financial year and November 2021. 

This meant that budget deficit could not be financed through the Government Investment Account but by borrowing domestically and externally. 

Faced with deficits which have been the norm during the eleventh National Development Plan (NDP11) period, Dr Matsheka announced several measures aimed at achieving fiscal balance. 

Dr Matsheka also called for public financial systems improvement and changes in the tax regime.  Value Added Tax (VAT) was increased from 12 to 14 per cent effective from April 1, 2021, Withholding Tax from dividends went up from 7.5 to 10 per cent while the fuel levy was raised by P1 per litre. 

During the year, government increased fees for services provided by several ministries such as transport and communications, infrastructure and housing development and tertiary education, research science and technology. 

In efforts to bring down personnel emoluments, said to be accounting for 15 per cent of GDP, government announced a decided to right size the public service and abolish 50 per cent of vacant posts.  

With International Monetary Fund (IMF) revelations that 37 per cent of public expenditure on infrastructure went to waste,  wastage in government was another matter of great concern.

 Zero-based budgeting, which emphasises starting a budget on a clean slate, was introduced.BOPA