World Bank Warns Against Reliance On Import Bans

The World Bank has warned Botswana to desist from relying too much on restricting importation of goods into the country. In recent years, Botswana imposed a ban on importation of water, vegetables, fertilisers and has threatened to ban more goods in an effort to boost local production. But in its latest Macro Poverty Outlook for Botswana, the World Bank is clear that this is not quite the path to follow because “it put(s) pressure on domestic prices”. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="3" ] “Excessive reliance on import substitution and restrictions to promote industrialisation should be avoided,” says the Bretton Woods institution. “Import restrictions to promote local industries put pressure on domestic prices.” The report notes that higher food prices might be a source of income growth for some poor rural households engaged in agriculture, “but they are expected to further hurt poor urban households, while higher fertiliser prices hamper agricultural production”. Interest rates In response, says the report, the Bank of Botswana tightened monetary policy by raising the interest rate by a cumulative 151 basis points during 2022. Significantly, the report notes that Botswana is vulnerable to external shocks, especially fluctuations in the prices of diamonds and other commodities, as well as climate shocks such as droughts. In particular, droughts affect livestock (beef being the primary agricultural export product) and crop production, therefore negatively impacting rural households. The World Bank pointedly calls for public sector reforms: “There is need to reform the public sector and its role in the economy to enable private sector development,” it says. “Investments in the tourism, agriculture (mainly livestock value chain), energy, and manufacturing sectors bode well to attract international capital flows.” The report reflects on domestic policies and calls for accountability in the course of their implementation. “Government needs to accelerate the implementation of the ‘Reset Agenda’ to transform the economy into a high-income economy,” it says. “This should be supported by enhanced accountability, competition, and governance.” Income inequities The World Bank also notes that “Botswana’s diamond-led growth model has started to show its limitations, including fiscal vulnerabilities, weak economic diversification, and persistent income inequities, which were further exacerbated by the COVID-19 pandemic,” says the report. It notes how Botswana’s economic growth slowed to 3.3 percent annually on average over 2012-21 and translated into low job creation, resulting in high unemployment (25.4 percent in 2022). However, the economy grew strongly by 6.5 percent in 2022 supported by favourable external demand for diamonds, the report observes. “Growth is expected to slow and average 4.0 percent over 2023-25,” it says. “The outlook relies on robust though slowing diamond demand and a pickup in non-mineral activities, supported by improved electricity and water supply and continued tourism recovery.” Non-mineral activities Noting that Botswana’s “inequality remains among the highest in the world”, the report states: “Poverty under the US$2.15 international poverty line is projected to remain relatively high for an upper-middle-income country at around 14.5 percent in 2023.” Because global demand is expected to decelerate and diamond prices to stabilise, GDP growth is projected at 4 percent in 2023 and into the medium term. The report notes that the outlook relies on a stable but robust performance of the diamond sector, while a modest pickup is projected in non-mineral activities, supported by improved electricity and water supply. It says Botswana’s outlook is subject to substantial downside risks mainly related to the broad effects of the war in Ukraine and a projected deceleration in global demand. According to the report, unemployment remains structurally high, posing challenges to Botswana’s inclusive development strategy, though it declines slightly from the post-pandemic peak of 26 percent in 2021 to 25.4 percent in 2022. [/ihc-hide-content][ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="3" ][/ihc-hide-content]

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World Bank Warns Against Reliance On Import Bans

The World Bank has once again warned that when everything is said and done, Botswana’s “inequality remains among the highest in the world”

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World Bank Warns Against Reliance On Import Bans

The World Bank has once again warned that when everything is said and done, Botswana’s “inequality remains among the highest in the world”

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