The government said it is taking necessary steps to address the adverse impacts of subdued economic activity on the budget.
Speaking at TransUnion Botswana’s recent “Transforming Botswana’s Financial Future” session, Dr. Sayed Timuno, Director of Research at the Ministry of Finance said mineral revenue has been impacted mostly and that there is a need for short-term and medium- to long-term interventions.
In the short term, Timuno said the government is rationalising both the recurrent and development budgets, with a target reduction of approximately P10 billion. Under the recurrent budget, the government plans a measured 5 percent reduction in subventions to State-Owned Enterprises and Revenue Support Grants to Local Authorities, a 50 percent cut in ministerial replacement expenditure accounts (e.g., computer, furniture, and office equipment replacement), vehicle replacement by 50percent, and early exit expenditure by 60 percent.
Further addressing the recurrent budget, Timuno noted that the government intends to postpone, forgo, and cease certain recurring commitments. Additional controls include centralising the authority to approve virements within the Ministry of Finance, suspending in-service training except for ongoing programs, limiting external travel to only highly critical official trips, and imposing stringent budgetary controls.
For the development budget, Timuno explained that rationalisation criteria will depend on the implementation status and spending profiles of specific projects. This includes deferring all new projects (i.e., contracts not yet awarded, including those under the Development Manager model), projects in feasibility or design stages, consultancy projects, and certain housing and office developments. Timuno added that the government will slow down some development projects that have yet to commence, especially those unlikely to drive economic growth.
These combined measures are expected to reduce the total ministerial budget by P9.16 billion, or 9.8 percent, with the recurrent budget expected to decrease by about P2.67 billion and the development budget by around P6.49 billion. The projected budget deficit is P9.8 billion, or 3.4percent of GDP, which Timuno said remains within the permissible threshold of 4 percent.
Looking to the medium and long term, Timuno outlined ongoing measures to stimulate economic growth, such as fostering an environment supportive of innovative small businesses, attracting Foreign Direct Investment (FDI), and creating linkages with local firms. Other long-term goals include maximising the value of public investments in education, improving digital financial services, strengthening credit access for SMEs, and promoting labor-intensive, tradeable sectors to boost employment opportunities.
Timuno further highlighted that the domestic economy faces both revenue and expenditure risks. Mineral revenue, as a percentage of GDP, is declining, while domestic revenue sources are insufficient to bridge the gap left by reduced external sources. On the expenditure side, he pointed out that the high wage bill is straining the budget while underspending in development limits growth and employment potential.
In light of these challenges, particularly due to weaker-than-expected performance in the diamond market, Timuno emphasised the need for a robust growth trajectory aimed at job creation and high-income status. Structural reforms, coherent policies to address productivity, and competitiveness enhancements are crucial, he noted. Additionally, he highlighted the importance of reducing the public sector’s economic footprint to allow greater private sector involvement and the acceleration of fiscal consolidation plans to build economic buffers.
