Bots rolling P24bn budget deficits until 2020

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