Botswana, a developing country which is narrowly diversified, needs to overcome emerging challenges such as climate change, fiscal and external sector sustainability, in order to transition to a high income status.
This is the message that came out clearly from Bank of Botswana Governor, Moses Pelaelo when launching the bank’s 2022 annual report this Wednesday. According to the Governor, there is an urgent need to elevate public discourse and mindset change campaign, the export growth led strategy and integration into global production. All these are necessary to address the high unemployment rate, grow the middle class and, therefore, ameliorate income inequality and poverty rates.
There is also an urgent need to rebuilding fiscal buffers through optimising domestic resource mobilisation including tax coverage and more targeted subsidies, rationalisation of expenditure to be growth enhancing and accelerating privatisation of state-owned enterprises. Pelaelo further told the press that while there is recognition of potentially adverse impact of climate change on economic performance and livelihoods, there are prospective economic, business and enterprise opportunities that could be derived from climate mitigation and transition initiatives as part of the economic diversification agenda and infrastructure development programmes.
Meanwhile, central bankers told the media that the past year has been characterised by exceptional difficult global markets in 2022, which led to the Bank recording substantially high fair value losses. “These adverse global market developments negatively affected the level of foreign exchange reserves and portfolio returns notwithstanding the positive balance of payments in 2022 on the back of improved performance of the diamond exports. Fortunately, there was no need for portfolio rebalancing in 2022,” noted the Governor. For the year under review, dividend paid to Government was P425.5 million; compared to P3.5 billion in 2021; P2.9 billion in 2020 and P4.1 billion in 2019.
Meanwhile, making a presentation in the same event, the bank director: research and financial stability, Innocent Molalapata said Gross Domestic Product (GDP) grew by 5.8 percent in 2022 compared to a higher growth of 11.9 percent in 2021. “Overall, the lower growth rate in 2022 is attributable to higher growth rates experienced in 2021 following the recovery from a contraction in 2020,” said the director.
Despite challenging economic times, which have forced more countries to borrow, the country has prioritised fiscal sustainability, as reflected in the successive National Development Plans (NDP) and the annual national budgets, which invariably focus on sustainable budgeting and the need to achieve fiscal consolidation, where there have been disruptions.
“This posture is also reflected in policy and legislative reforms that support fiscal sustainability and related public financial management strategies and rules. Notwithstanding this, Botswana’s fiscal position has deteriorated in recent years. During 2019/20 and 2020/21, the budget deficits were, in part, due to the impact of the COVID-19 pandemic. However, this was a continuation of a long-term structural trend and weaknesses, mainly with respect to unstable fiscal revenues from the mining sector, in the face of consistently rising public expenditure," said the bank’s 2022 annual report in part.
Talking of a related matter of debt, the finance minister, Peggy Serame stated during the 2023/24 budget speech in February that government and government-guaranteed debt is expected to remain below 25 percent of GDP by the end of NDP 11 in March 2023, which is a sustainable level and well below the statutory limit of 40 percent of GDP. She added that however, with limited room to draw down from government’s savings, any further budget deficits will result in increased borrowing. She is of the view that this trend, coupled with rising interest rates, means that they must pay attention to their growing debt service obligations.
This is the message that came out clearly from Bank of Botswana Governor, Moses Pelaelo when launching the bank’s 2022 annual report this Wednesday. According to the Governor, there is an urgent need to elevate public discourse and mindset change campaign, the export growth led strategy and integration into global production. All these are necessary to address the high unemployment rate, grow the middle class and, therefore, ameliorate income inequality and poverty rates.
There is also an urgent need to rebuilding fiscal buffers through optimising domestic resource mobilisation including tax coverage and more targeted subsidies, rationalisation of expenditure to be growth enhancing and accelerating privatisation of state-owned enterprises. Pelaelo further told the press that while there is recognition of potentially adverse impact of climate change on economic performance and livelihoods, there are prospective economic, business and enterprise opportunities that could be derived from climate mitigation and transition initiatives as part of the economic diversification agenda and infrastructure development programmes.
Meanwhile, central bankers told the media that the past year has been characterised by exceptional difficult global markets in 2022, which led to the Bank recording substantially high fair value losses. “These adverse global market developments negatively affected the level of foreign exchange reserves and portfolio returns notwithstanding the positive balance of payments in 2022 on the back of improved performance of the diamond exports. Fortunately, there was no need for portfolio rebalancing in 2022,” noted the Governor. For the year under review, dividend paid to Government was P425.5 million; compared to P3.5 billion in 2021; P2.9 billion in 2020 and P4.1 billion in 2019.
Meanwhile, making a presentation in the same event, the bank director: research and financial stability, Innocent Molalapata said Gross Domestic Product (GDP) grew by 5.8 percent in 2022 compared to a higher growth of 11.9 percent in 2021. “Overall, the lower growth rate in 2022 is attributable to higher growth rates experienced in 2021 following the recovery from a contraction in 2020,” said the director.
Despite challenging economic times, which have forced more countries to borrow, the country has prioritised fiscal sustainability, as reflected in the successive National Development Plans (NDP) and the annual national budgets, which invariably focus on sustainable budgeting and the need to achieve fiscal consolidation, where there have been disruptions.
“This posture is also reflected in policy and legislative reforms that support fiscal sustainability and related public financial management strategies and rules. Notwithstanding this, Botswana’s fiscal position has deteriorated in recent years. During 2019/20 and 2020/21, the budget deficits were, in part, due to the impact of the COVID-19 pandemic. However, this was a continuation of a long-term structural trend and weaknesses, mainly with respect to unstable fiscal revenues from the mining sector, in the face of consistently rising public expenditure," said the bank’s 2022 annual report in part.
Talking of a related matter of debt, the finance minister, Peggy Serame stated during the 2023/24 budget speech in February that government and government-guaranteed debt is expected to remain below 25 percent of GDP by the end of NDP 11 in March 2023, which is a sustainable level and well below the statutory limit of 40 percent of GDP. She added that however, with limited room to draw down from government’s savings, any further budget deficits will result in increased borrowing. She is of the view that this trend, coupled with rising interest rates, means that they must pay attention to their growing debt service obligations.
