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Matsheka laments ‘unsustainable’ fiscal path

Matsheka laments ‘unsustainable’ fiscal path
WORRIED: Minister Matsheka

The Minister of Finance and Economic Development, Dr Thapelo Matsheka has poured scorn on the country’s fiscal path, calling it unsustainable.

When presenting the 2020/2021 Budget Speech earlier in the week, Matsheka noted that whereas the National Development Plan (NDP) 11 had environed a moderate cumulative budget surplus, the six-year Plan’s mid-term review anticipates cumulative deficits.

During the upcoming financial year, a budget deficit of P5.22 billion is projected, which amounts to 2.4 percent of the GDP.

The Minister noted the predicted deficit comes amid expected huge investments in economic infrastructure to support the transformation agenda.

Renowned economist and former Bank of Botswana Deputy Governor, Dr. Keith Jefferis agrees with Matsheka’s assessment that the fiscal path is not sustainable.

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“He is right. For a long time, the government has been depending on diamonds for revenue and obviously the diamond sector is not growing,” reflected Jefferis, a Managing Director at Econsult, a local economic consultancy firm.

Matsheka laments ‘unsustainable’ fiscal path
NUMBERS MAN: Jefferis

Despite the tight fiscal position government finds itself in, Matsheka says his Ministry is determined to restore fiscal sustainability in the medium term to build budget surpluses in the last two years of NDP 11, which runs until 31 March 2023.

The Minister explained this is part of the effort to rebuild the country’s financial buffers, which he says were seriously eroded over the past few years.

“A number of initiatives will be undertaken on the revenue and expenditure sides, both in the short term and in the long term, in order to achieve the stated objectives,” he revealed.

Government revenues have recently been under pressure mainly due to the subdued diamond market and declining of Southern African Customs Union (SACU) receipts.

In view of this, and in order to boost revenue, Matsheka says government will adjust a number of fees and charges, some of which were last altered over a decade ago.

These adjustments will come into effect at the start of April and will subsequently be adjusted annually.

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The taxman is also expected to enhance revenue collection and increase inspections on imported goods in order to curb non-compliance by importers at ports of entry.

Botswana Unified Revenue Services (BURS) has recently gone all out to lodge war against importers of grey import vehicles, predominantly sourced from Asia and the United Kingdom.

In the past, economists have advised that government should consider increasing tax rates in order to broaden its revenue base as well as including other forms of taxes such as the Financial Transactions Tax.

However, Matsheka this week ruled out any possibility of adjustments in tax rates or the introduction of any new taxes.

“While there is a scope to adjust tax rates, considering their levels relative to the region, priority would, in the interim, be on improving efficiency in the collection of existing taxes, rather than adjusting tax rates,” reiterated the Finance Minister.

Nevertheless, Jefferis feels in the long-term government will have no choice but to increase rates. However, he is confident the short-term solutions put in place, like adjusting fees and charges, will work for the moment.

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