Africa-Press – Botswana. The on-going geopolitical tensions, which continue to disrupt global economic prospects have strong negative spillover effects on Botswana’s growth, says Minister of Finance, Ms Peggy Serame.
Delivering the 2024/2025 budget proposals in Parliament, Ms Serame said ‘these include risks in the diamond sector stemming from weak economic activity in the major trading economies.
Risks in the diamond sector, particularly in the beneficiation sub-sector will also be worsened by the G7 plan to verify the origin of non-Russian goods through diamond certification in Antwerp, Belgium’.
“All these risks require effective policy responses and mitigation efforts to enhance competitiveness and diversify the economy to build resilience against external shocks,” she said.
Minister Serame said if not mitigated, risks to the macroeconomic outlook could reverse some of the achieved macro-fiscal gains.
She said such risks could have adverse effects on the country’s ability to accumulate foreign exchange reserves and government revenue.
Minister Serame said other negative risks to the macro-fiscal profile could come from inadequate capacity to appraise, prioritise, monitor and evaluate development projects as well as the inability of relevant bodies to effectively perform their oversight roles.
She said the proposed expansionary budget presented opportunities for opportunistic behaviours, while climate related risks could disrupt human and physical capital as well as economic activity during the year.
Additionally, she said the growth risk had the potential to lengthen the time required to reach the annual average growth rate of six per cent needed to transform Botswana into a high-income country by 2036.
She said the lower growth may also increase the revenue risk and compromise the government’s ability to provide critical services such as water, sanitation, education, health and some of the growth-enhancing physical infrastructure,” she said.
“This revenue risk when combined with expenditure risks from increased demands on government spending emanating from the rising wage bill and subventions to State-Owned Enterprises can widen the fiscal deficit and compromise fiscal sustainability.
“This may delay the planned fiscal consolidation and compromise the current fiscal strategy of generating surpluses and rebuilding buffers and further reduce Botswana’s ability to respond to future shocks in a timely and effective manner,” said Minister Serame.
She said the expenditure risks may also arise due to inflation risks emanating from supply-chain disruptions which could affect government expenditure items that are largely indexed to inflation.
Nonetheless, Ms Serame said while inflation had moderated, any inflationary pressures beyond currently projected levels could prompt the central bank to hike policy rates and tighten financial market conditions, raising borrowing costs, that could elevate debt risks making it costly for government to finance future budgets through borrowing.
Accordingly, she said measures would be implemented during the year to focus on improving domestic revenue maximisation coupled with reduced expenditure leakages, intensified monitoring of both recurrent and development spending as well as climate change mitigation and adaptation, among others.
“All of these efforts could lessen the impact of the identified risks on the economy and improve fiscal sustainability and ultimately strengthen government’s ability to provide critical services to Batswana,” she said.
and ultimately strengthen government’s ability to provide critical services to Batswana,” she said.
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