06 Feb 2023

The Government Investment Account (GIA) has shown some recovery over the past year, reaching P17.8 billion in October last year compared to P9.8 billion in the previous year.

Delivering the 2023 budget speech yesterday, Minister of Finance, Ms Peggy Serame explained that the GIA was accounted for by special funds and deposits accounts, which had designated uses or were held on behalf of third parties, and therefore may not be automatically available for budgetary purposes.

She added that low GIA levels, however, limited the extent to which government could draw on its reserves to finance future budget deficits, thereby leaving borrowing as the main financing option.

Notwithstanding recovery in the GIA, taking a long term view of the fiscal position, she said there was need to address some worrying trends.

“Back in 2008, government’s net financial assets were equivalent to 40 per cent of the Gross Domestic Product (GDP) while by 2021, after many years of budget deficits, net financial assets were equivalent to minus 20 per cent of GDP, as the GIA was substantially drawn down to and borrowing increased,” she said.

She said the ministry would make efforts to restore government’s net financial assets to positive territory, with savings at least sufficient to balance the debt, and therefore no effort would be spared to return the fiscal balances to a favourable position. Ms Serame said Botswana’s debt levels, however, had historically been relatively low and debt servicing had never been a challenge.

The minister said government and government-guaranteed debt was expected to remain below 25 per cent of the GDP by the end of NDP 11, which was below the statutory 40 per cent of the GDP.

However, she emphasised the need to pay attention to growing debt obligations owing to limited room to draw down from government’s savings.

“We have carefully assessed the medium term debt risk, distress or burden and our capacity to repay, and I am convinced that our envisaged fiscal strategy will restore fiscal sustainability before we are forced into debt crisis,” she said. ends