Covid effects to influence next budget
The Ministry of Finance and Economic Development this week called a Budget Pitso for stakeholders in order to discuss what the future holds for this country.
The pitso is expected to discuss the highlights of the 2022 budget strategy paper. There will also be discussion of the national priorities including what needs to be done, by whom and when, as well as the role of the private sector.
Senior Researcher Fellow at BIDPA, Dr. Kelesego Mmolainyane is expected to speak on outstanding issues post Covid- 19 and what options Botswana has. The Ministry will share with stakeholders its Budget Strategy Paper ( BSP) which usually sets the tone of the discussion. The BSP has been prepared annually since its inception in 2010, to facilitate informed discussions when government is preparing the annual national budget.
It serves as a key instrument under the medium- term budgetary framework, outlining the aggregate revenue and expenditure envelope and projections. It also presents the Medium- Term Fiscal Framework ( MTFF), which helps to ensure overall fiscal discipline through cautious spending, and that resources are spent effectively and efficiently. The BSP has also been used to enhance understanding amongst stakeholders of the broader macro- fiscal issues that guide both the budgeting process and the prioritisation of budget allocations, according to thematic areas. It further helps to bridge the gap between public expectations, and what is fiscally attainable given available resources. Records show that the revised budget deficits over the current and the next financial year mean a higher funding requirement than was initially anticipated at the time of the preparation of the 2021/ 22 budget. The deficit funding requirement for the 2021/ 22 and 2022/ 23 financial years is estimated at approximately P16.97 billion in total. This is higher than P10.8 billion that was projected earlier at the time of the reading of the budget speech. This is largely offset by the reduced funding requirements for the 2020/ 2021 financial year due to a smaller- thananticipated deficit.
The medium term fiscal forecasts indicate that anticipated net borrowings will be P7.67 billion and P11.48 billion for the financial years 2021/ 2022 and 2022/ 2023, respectively. It said out of these, issuance of domestic debt is estimated at P4.5 billion and P5.0 billion, while net external borrowing needed to meet the funding requirements is estimated to be P3.17 billion and P6.48 billion in the respective years.
The pandemic has hit Botswana hard and considerable organisational and financial resources have been devoted to securing sufficient vaccines to protect the entire adult population, with the vaccination programme in full swing as soon as vaccine consignments arrive in the country. The health system has been stretched and resources have been devoted to ensuring adequate capacity to treat those who need to be hospitalised. Records show that the overarching set of national priorities and strategic objectives was laid out in the Mid- Term Review ( MTR) of NDP 11, and the accompanying Economic Recovery and Transformation Plan ( ERTP). Since the approval of the MTR and the ERTP by Parliament in September 2020, the economic and social environment has been overshadowed by the impact of COVID- 19, which has been prolonged beyond the expectations of many. It is said the set of priorities agreed in the MTR and ERTP have been complemented by the Reset Agenda priorities as pronounced by President Dr. Mokgweetsi Masisi, which reflects the need to adjust some priorities in light of new and unexpected challenges. Further those new approaches mean finding new and smarter ways of implementing programmes and projects in a timely manner and within approved budgets. In particular, national priorities have shifted towards saving the population from the impact of COVID- 19, while maintaining and developing existing priorities. Based on this argument, it is said the 2022 Budget reflects some of the following objectives: Saving Botswana’s population from COVID- 19, and Promoting export- led growth and diversification, including the development of value chains and economic clusters.
Records indicate that the preliminary outturn for 2020/ 2021 indicates that total revenue and grants stood at P51.25 billion, which is P2.9 billion higher than the revised budget of P48.33 billion presented in the February 2021 budget speech.
The significant difference between preliminary budget outturn and the revised budget is largely driven by mineral revenue, which accounted for P9.56 billion, compared to the revised budget figure of P6.56 billion.
Customs and excise revenue amounted to P16.46 billion, slightly lower than the revised budget figure of P16.50 billion. Contrary to expectations, given the outbreak of COVID- 19 and measures taken by Government to defer tax payments by domestic companies during the last half of 2020/ 2021 financial year, Non- Mineral income tax amounted to P12.49 billion, So far, the economic growth is projected to rebound in 2021, based on the anticipated continued recovery of the diamond industry, improved global economic activity and trade, complemented by continued roll out of vaccines in Botswana and the impact of interventions such as the Industry Support Facility, geared towards stimulating economic activity. Positive prospects are anticipated in 2021 after growth of 0.7 percent was registered during the first quarter of the year. GDP growth is projected to reach 9.7 percent in 2021 as a whole. Further ahead, the economy is projected to grow by 4.3 percent and 4.2 percent in 2022 and 2023, respectively. Mining sector growth is anticipated to rebound to 33.9 percent in 2021, before moderating to 3.5 percent and 2.0 percent in 2022 and 2023, respectively. The recovery in the diamond sector is supported not just by improved demand for diamonds, but also higher diamond prices, which have recovered strongly since the beginning of 2021.