Africa-Press – Botswana. The World Bank has approved a $150 million loan to the Botswana government, part of the bank’s programme to support economic recovery which was worsened by the COVID-19 pandemic.
The loan is the last tranche of previous loans extended by the Bretton Wood institution to the diamond dependent country. In June 2021, the World Bank approved a $250 million credit under the Programmatic Economic Resilience and Green Recovery Development Policy (ERGRDP),
The funds are to be used for acceleration of key economic reforms and support the implementation of Botswana’s Economic Recovery and Transformation Plan (ERTP), and bolster resilience to future shocks by diversifying the economy.
Botswana’s option to drawdown from the previously accumulated savings has been diminished following a rundown on existing fiscal buffers which has reduced the government’s capacity and resources needed to accelerate the implementation of structural reforms.
Botswana’s debt has increased since the pandemic. The country started 2020 with a P30.4 billion debt and ended the year with P38.6 billion in loans – with the increase largely due to domestic borrowing, jumping from P15 billion to P22 billion. Government debt and guarantees increased to P43 billion in December 2022 from P37.2 billion in December 2021.
As a proportion of gross domestic product (GDP), government debt fell to 21.6 percent in December 2022 compared to 22.6 percent in December 2021. Total domestic borrowing and guarantees amounted to P28.6 billion in December 2022; thus, within the statutory domestic borrowing limit of 20 percent. External debt is estimated at 9.8 percent of GDP for the same period, also below the 20 percent threshold.
“The ministry of Finance considers the debt level sustainable even after accounting for the increasing debt service obligations due to the acquisition of new external loans secured under the ERGRDP at the International Bank for Reconstruction and Development, for financing economic recovery,” the officials said in the recently released Financial Stability Report.
Still under the ERGRDP, another loan of $100 million was sourced from the Organisation of the Petroleum Exporting Countries Fund for International Development (OPEC Fund).
Furthermore, the ministry has sought a loan not exceeding ¥15 billion from the Japan International Cooperation Agency (JICA), towards the COVID-19 Crises Response Emergency Support Programme. Despite the increase, government debt is expected to remain below the statutory limit at a projection of 20.7 percent in 2023/24, the ministry officials said.
“The increase in external debt demands a robust debt management strategy to manage the interest rate and exchange rate risks. Consequently, ministry of Finance uses the Medium-Term Debt Management Strategy of 2016/17 – 2018/19 as a guide. Preparations for the new strategy, which outlines measures of hedging against interest rate risk and exchange rate risk, are underway. The strategy is expected to be published in September 2023,” according to the financial stability report.
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