Connect with us

Hi, what are you looking for?

Business

Public debt under control

Public debt under control
BANK OF BOTSWANA: Central Bank HQ

Although an increase has been recorded, Botswana has managed to maintain low and sustainable public debt (* see Back to School with Adamson, 6A) from 2005 to 2020.

This was the underlying findings from in-depth research conducted on the topic by Baby Mogapi and Karabo Badirwang.

In their assessment of external sector developments and policy implications, the duo found that from 2004/2005 to 2019/2020, public debt averaged 16.5 percent.

During this 15-year time frame, the total public debt remained well below the maximum statutory threshold of 40 percent of GDP, which comprises 20 percent of ceilings for external and 20 percent for domestic debt, including guarantees.

Total debt is also reported to have remained significantly lower than the set threshold of 60 percent of GDP for SADC macroeconomic convergence targets.

Advertisement. Scroll to continue reading.

However, Mogapi and Badirwang believe due to the adverse impact of Covid-19 containment measures on economic activity, and more specifically on exports receipts, public debt will increase considerably to finance the current account deficit which stood at P18.3 billion in 2020.

Notwithstanding, foreign exchange reserves have been on a downward trajectory in the latter part of the review period, which is reportedly due to drawdowns of the government portion of the reserves represented by the Government Investment Account (GIA).

This was done to finance budget deficits as well as to stimulate the economy.

“Furthermore, both the overall level of foreign exchange reserves and balances in the GIA were particularly negatively affected by the Covid-19 induced trade shock and consequent economic contraction in 2020,” note the pair in their report.

The trend in the current account, according to Mogapi and Badirwang, has been observed to be dependent on diamond exports, which is largely influenced by global demand and diamond prices unrelated to exchange rate movements.

Going forward, they suggest that the current account position should be less dependent on the diamond market to cushion the economy and preserve foreign exchange reserves.

Advertisement. Scroll to continue reading.

While the public debt rose significantly in the recent past, especially after the 2008/2009 global financial crisis, Botswana’s debt service matrices and overall sovereign debt level are said to have been relatively well managed.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Advertisement
Advertisement
Advertisement

You May Also Like

Entertainment

Having burst onto the scene as a Hip Hop/Motswako artist, Thintee has switched track, changing gears to embrace the dominant genre that is Amapiano....

News

The Francistown City Council has been cracking the whip in an effort to control illegal dumping of waste in the second city. According to...

News

*Illegal immigrant father charged for negligence

Sports

Botswana Chess Federation (BCF) has assembled a formidable team that will represent the country at the African Youth Championships from the 17th-26th of September...

Advertisement

Copyright © TheVoiceBW. (Since1993) made with ❤️ in Botswana.