Bots rolling P24bn bud­get deficits un­til 2020

Chronicle (Zimbabwe) - - Business -

the com­pet­i­tive­ness of the coun­try’s ex­ports whilst si­mul­ta­ne­ously lev­el­ling the play­ing field be­tween im­porters and do­mes­tic pro­duc­ers.

This ex­ter­nal re­bal­anc­ing ap­proach would in­cen­tivise for­eign ex­change earn­ers (in­clud­ing all de­pos­i­tors) who are the gen­er­a­tors of for­eign cur­rency whilst at the same time levy­ing all pay­ments of im­ports of goods and ser­vices (in­clud­ing with­drawals).

The in­ten­tion of this ap­proach would be to man­age for­eign ex­change us­ing mar­ket based mech­a­nisms. There would be no charges on the use of plas­tic money and other elec­tronic pay­ment means. This ap­proach would be neu­tral to net cash de­pos­i­tors. This will, there­fore, be a mar­ket mech­a­nism to sup­port in­creased use of plas­tic money and for at­tract­ing for­eign ex­change de­posits.

The down­side risk of this sec­ond ap­proach is that it would in­crease prices within the econ­omy. The Bank, how­ever, be­lieves that the levy on im­ports would have a min­i­mal ef­fect on in­fla­tion given that the coun­try is cur­rently in de­fla­tion. Al­low­ing some level of in­fla­tion­ary pres­sures in the econ­omy would help to in­crease com­pany rev­enues and prof­itabil­ity with pos­i­tive mul­ti­plier ef­fects on Gov­ern­ment rev­enues, em­ploy­ment and GDP growth.

Most firms in Zim­babwe have al­ready im­ple­mented or are in the process of im­ple­ment­ing the first ap­proach of in­ter­nal de­val­u­a­tion of re­duc­ing wages and salaries. In view of these de­vel­op­ments, it would be pru­dent to but­tress the first ap­proach by the sec­ond ap­proach of in­ter­nal de­val­u­a­tion to deal with the cur­rent ac­count gap. The Bank shall be ac­cel­er­at­ing the sec­ond ap­proach of in­ter­nal de­val­u­a­tion af­ter con­sul­ta­tions with busi­ness and con­sumers.

Ex­tracted from the RBZ mid-term mon­e­tary pol­icy re­view state­ment. BOTSWANA will in­cur rolling bud­get deficits amount­ing to P24.7 bil­lion for the next three fi­nan­cial years to boost growth through fis­cal stim­u­lus.

But economists are scep­ti­cal about the sus­tain­abil­ity of a min­er­alled econ­omy spend­ing its way out of an eco­nomic down­turn.

Largely due to a P4 bil­lion rise in de­vel­op­ment ex­pen­di­ture, gov­ern­ment’s spend­ing is ex­pected to out­weigh rev­enues in the 2017-2018 fi­nan­cial year by P6.8 bil­lion or -4.1 per­cent of the GDP.

Deficits of sim­i­lar mag­ni­tudes are seen un­til 2019 be­fore the bud­get short­fall de­clines to -2.2 per­cent in 2020.

Speak­ing at a 2017-2018 Bud­get Pitso, deputy sec­re­tary for Macroe­co­nomic Pol­icy in the Min­istry of Fi­nance and De­vel­op­ment Plan­ning, Ke­lapile Ndobano said the deficits are at­trib­ut­able to the pro­jected mod­est growth in rev­enues, and con­tin­ued pres­sures aris­ing from the im­ple­men­ta­tion of the Eco­nomic Stim­u­lus Pack­age (ESP).

The pro­jected to­tal rev­enues and grants for 2017-2018 is P52.8 bil­lion with P59.6 bil­lion ex­pen­di­ture, of which, P40.8 bil­lion is ear­marked to cover the re­cur­rent ex­pen­di­ture, while P18.9 bil­lion is planned as de­vel­op­ment ex­pen­di­ture.

“Amongst the ma­jor down­side risks to the 2017-2018 bud­get out­look in­cludes the con­tin­ued slow re­cov­ery in the global econ­omy, un­di­ver­si­fied rev­enue base, and un­fore­seen emer­gency ex­pen­di­tures to ad­dress wa­ter and elec­tric­ity sup­ply chal­lenges, and nat­u­ral dis­as­ters like drought and out­break of an­i­mal dis­eases,” he said. How­ever, econ­o­mist Keith Jef­feris feels that by choos­ing the fis­cal stim­u­lus route to boost growth, gov­ern­ment has cho­sen an easy way out, which will not be sus­tain­able in the medium to long term.

Due to draw­downs, gov­ern­ment’s cash bal­ances at the Bank of Botswana in the past year have de­clined by P8 bil­lion to P33 bil­lion as at July 2016.

Gov­ern­ment says it will con­sider a mix of bor­row­ing, both do­mes­tic and ex­ter­nal, and draw­down on its cash bal­ance to fund the pro­jected bud­get deficits.

Turn­ing to eco­nomic growth, Ndobano said gov­ern­ment tar­gets a growth rate of 4.1 per­cent in 2017 up from a pro­jected 3.5 per­cent this year with the out­look for 2017 un­der­pinned by the ex­pected im­prove­ment in the min­ing sec­tor.

For 2016, an eco­nomic growth rate of 3.5 per­cent is ex­pected up from a nega­tive growth rate of -0.3 per­cent in 2015.

The 2016 pro­jected growth rate is, how­ever, lower that the es­ti­mates an­nounced by fi­nance min­is­ter, Ken­neth Matambo in Fe­bru­ary when he pro­jected the econ­omy to grow by 4.2 per­cent in 2016 and 4.3 per­cent next year. — Mmegi

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