Africa-Press – Botswana. The new government will have to introduce unpopular structural reforms and policy changes that will support higher growth and job creation, a renowned economist, Dr Keith Jeffries has said.
He notes in a commentary that the Umbrella for Democratic Change (UDC) government inherited an office facing fiscal liquidity crisis and an economy in technical recession.
The new government was faced with unsustainable long-term fiscal trends and poorly conceived policies, wrote Dr Jeffries. He stated that there were also challenges like an inefficient and bloated public sector and persistent problems of inequality, poverty and unemployment.
Dr Jeffries said Government Investment Account (GIA) had largely been depleted and the government avoided running out of money in September by deferring payments until quarterly SACU money arrived in the first week of October.
Dr Jeffries warned that the country would run out of cash in December – and be unable to pay salaries, unless corrective measures are taken. He stated that spending had to be cut for the remainder of this financial year, either cancel or delay unfunded public expenditure project contracts.
Talking about preparations for 2025 Budget, Dr Jeffries said it must be based on realistic revenue projections and not wishful thinking as in 2024. However, the Budget Strategy Paper has not been published and consultations have not been held.
Dr Jeffries said there was need to restore confidence adding credit rating was already at risk.
“The government also needs to prepare a medium-term fiscal framework and stick to it,” he said.
The National Development Plan 12 was scheduled to begin in the next financial year and Dr Jeffries said it could be better if the Transitional NDP was extended by one year to complete ongoing projects and maintenance.
He noted that UDC manifesto had key commitments to alleviate poverty through increased social allowances and the minimum wage.
He said this would require a financial plan and some spending lines would be reduced to fund new commitments and it has to come up with measures to raise revenues.
He said the rise in minimum wage might result in job losses especially in labour-intensive industries such as security, retail and domestic service.
On fiscal reforms, Dr Jeffries said the country had experienced unsustainable budget deficits and therefore it should be cut, adding this should have been done even before the diamond market slump.
He said there was need to rebuild buffers and give a firm commitment to a balanced budget.
“The government has to respond to possible non-recovery or only partial recovery of revenue from diamonds and safeguard SACU revenues,” he wrote.
Dr Jeffries cautioned that government had to come up with new sources of revenue and more effective revenue collection.
“The government has to aggressively target Foreign Direct Investment (FDI), open up immigration, push into renewable energy and reform social welfare,” he noted adding that it should focus on commercial agriculture, not subsistence.
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