Botswana’s financial position deteriorates further
On Monday, the latest Budget Speech (BS) confirmed what everyone suspected: the country’s financial position is continuing on its downward trend with yet another Budget Deficit forecast.
Presenting the 2022/2023 Budget Speech at the start of the week, Minister of Finance and Economic Development, Peggy Serame warned this reflects long-term structural trends that need to be addressed.
“The long-term trends show a progressive decline in fiscal revenues relative to the size of the economy, largely reflecting lower mineral revenues as the diamond industry has matured and the costs of mining have increased, combined with the volatility of revenues from the Southern African Customs Union (SACU),” highlighted Serame in her first ever BS.
Revenue from both diamonds and SACU revenue have historically accounted for almost two-thirds of total revenue.
To compound the situation, Serame revealed domestic revenue generation from taxes, fees and charges has been relatively low.
“The result of lower mineral revenues has been a structural change in the budget. Historically, Budget Deficits were infrequent and would be balanced by subsequent surpluses,” she said.
With these deficits now becoming persistent and structural, the Minister warned the situation is likely to lead to an unsustainable level of public debt.
“This cannot be sustained, and requires that both domestic revenue mobilisation and expenditure levels are addressed,” she said.
In order to address the issuing of recurring Budget Deficits, the Finance Minister proposed a number of interventions.
“The first challenge is to broaden the domestic revenue base by extending the tax net, and improving the efficiency of revenue collection”.
The implementation of these measures started last year, and are expected to continue into the upcoming fiscal year, which begins in April.
“Attention will also be paid to ensuring that those who should pay taxes do so,” Serame said.
As part of managing the fiscal expenditure to address the Budget Deficit, the Minister called for reduction and effective management of the government wage bill.
“This will be implemented through the Workforce Planning System, which is being developed by the Directorate of Public Service Management (DPSM), through the Botswana Public Service Workforce Strategy and Workforce Plans Project that started in July 2021,” she announced.
Other measures include cutting on subventions to commercial State-Owned Enterprises (SOEs) which will also see some SOEs restructured and others merged. Revenue provisions to Local Authorities will also be cut.
For the 2022/2023 financial year, the country is yet again faced with another deficit, this time in the region of P6.98 billion or 3.2 percent of the GDP.
Total revenues and grants for the 2022/2023 financial year is expected to amount to P67.87 billion against total expenditure of P74.84 billion.