- As ministries raid government purse
- Moves procurement from ministries
- Wants to generate savings equivalent to 1.2 percentage points of GDP in the current fiscal year.
The Ministry of Finance is set to assume full control of government procurement processes as part of sweeping fiscal reforms aimed at restoring stability amid tightening financial pressures.
The move is detailed in the IMF’s Botswana Staff Report for the 2025 Article IV Consultation, produced in close consultation with Botswana authorities and released recently.
According to the IMF, centralising procurement responsibilities—previously handled by individual line ministries—marks a significant step in the government’s efforts to rein in recurrent spending and improve efficiency. The report estimates that the Ministry of Finance’s assumption of all procurement duties could generate savings equivalent to 1.2 percentage points of GDP in the current fiscal year.
The initiative is part of broader reforms, including reducing transfers to state-owned enterprises (SOEs) and preparations for a World Bank-supported expenditure review to identify inefficiencies within the public wage bill. While these measures may not immediately impact the 2025 fiscal balance, the IMF says they aim to create long-term cost-saving opportunities.
The Ministry of Finance has extended the moratorium on travel and overtime payments—first introduced in July—until March 2026, citing continued fiscal pressure. The ministry said the decision follows concerns that Ministries, Departments and Agencies (MDAs) “continue to commit Government to more financial obligations through travel; both local and international and, uncontrolled overtime expenses.”
“This is evidenced by the insignificant reduction in both the travel and overtime expenditure,” the ministry noted.
In addition, the suspension of the generation of Government Purchase Orders (GPOs) in the Government Accounting and Budgeting System (GABS) has also been extended, now running from 1 January 2026 to 31 March 2026. According to the Ministry, “The decision to continue with the suspension is informed by [the] already alluded to financial position which has not improved,” adding that MDAs will continue using the existing process for urgent and emergency requests.
“During this period no consideration will be made for requests for additional funds through virements and supplementary funds, unless under special circumstances endorsed by the Ministry of Finance.”
The reforms come amid acute economic pressures. The IMF notes that mining activity contracted in the first half of 2025, while non-mining sectors remain subdued due to government spending restraint and delayed payments. As a result, GDP is projected to contract by about 1 percent this year, with inflation—partly driven by exchange-rate depreciation—expected to reach around 5 percent year-on-year by the end of 2025.
The external sector is also weakening. Despite improved portfolio investment driven by mandatory repatriation of pension fund assets, the financial account deteriorated due to declining foreign direct investment, reduced external debt, and rising commercial bank deposits abroad—a reflection of economic uncertainty. Errors and omissions widened to 1.6 percent of GDP, indicating possible unrecorded capital outflows linked to concerns over policy sustainability.
Looking ahead, the IMF warns that without decisive policy action, Botswana’s public debt could rise sharply, potentially approaching 60 percent of GDP by 2030. Mineral revenues are expected to recover only partially, while international reserves could be gradually depleted under the baseline scenario.
The Fund emphasises that structural fiscal reforms remain critical. “Strengthened public procurement can help reduce costs and increase the efficiency of public investment,” the report states. It adds that better cash and debt management, along with the introduction of accrual-based budgeting, will be essential to ensure government obligations are met on time. Accelerated digitalisation and reforms to tax administration are also seen as vital to boosting persistently low non-mineral revenue.
The financial sector faces rising pressures as delayed government payments contribute to higher loan repayment delays, including mortgages. A growing share of private-sector borrowers heightens credit risk during downturns, while falling diamond prices weaken the repayment capacity of mining companies. The IMF also highlights increasing interconnectedness between banks and non-bank financial institutions—particularly via pension fund financing of government deficits—which could amplify spillovers if economic conditions worsen.
On fiscal management, the IMF urges the government to address long-standing structural weaknesses, including a high wage bill, narrow revenue base, complex and poorly targeted social support systems, and elevated transfers to SOEs. The wage bill alone accounts for more than 13 percent of GDP and 58 percent of total tax revenues, well above peer averages.
The report recommends adopting a medium-term wage strategy aimed at gradually lowering the wage bill to about 11 percent of GDP, through hiring restraint, improved management of promotions and allowances, alignment of wage growth with productivity, and restructuring human resource systems. The ongoing World Bank-supported expenditure and wage bill audit is expected to identify specific cost-cutting measures.
On social protection, the IMF encourages better targeting of programmes to reduce costs while improving efficiency.
The Fund concludes that fiscal consolidation—focused on revenue mobilisation, reducing the wage bill, streamlining social support, improving capital spending efficiency, strengthening SOE oversight, and reforming procurement—will be necessary to stabilise debt and support medium-term economic growth.
