Despite facing a third consecutive budget deficit, public debt is said to have remained modest and well within 40 percent statutory requirements.
Deputy Secretary, Macroeconomic Policy in the Ministry of Finance and Economic Development, Kelapile Ndobano, revealed this during the annual Budget Pitso hosted in Gaborone on Tuesday.
Ndobano said they are comfortable with the levels of public debt at the moment as the law has not been broken by exceeding required levels. With recurring budget deficits, it has meant that government had to finance it with a combination of borrowings from both internally and externally as well as drawing down from government cash balances.
However, government is said to be mainly skewed towards borrowing from the local market as the minister, Kenneth Matambo indicated when responding to a question from the floor.
“We are borrowing as much as possible from the domestic market through issuance of bonds,” said the minister.
Just like in the past two financial years, government is faced with yet another budget deficit, and this time around it is estimated at P5.11 billion, or 2.4 percent of expenditure of P66.40 billion against total revenue and grants estimated at P61.28 billion.
To finance this deficit, Ndobano said government will, just like in the past, borrow both domestically and externally.
Domestically government will entail issuance of government debt securities such as treasury bills and long-term government bonds while externally, borrowing will be restricted to concessional borrowing from both bilateral and multilateral development partners.
President Mokgweetsi Masisi recently returned from a trip in China where the country offered Botswana P340 million loan in addition to the cancellation of P80 million debts.
In addition to this combination of borrowings to finance budget deficit, Ndobano said government will also increase domestic revenue sources as well as strengthen collections of existing taxes and adjust user fees, where necessary.
Though the BSP is not the actual depiction of the coming year, it however provides a picture of what is expected when the minister presents it to Parliament in February. Matambo said the budget preparations are being undertaken at a time when there are trade related uncertainties, particularly between the US and China.
He pointed out that such usual uncertainties in the global market result in profound negative externalities to the domestic economy, particularly through the mining sector.
“Hence, due to these uncertainties in the global economy, growth in our economy remains vulnerable,” he said when giving the opening remarks during the general stakeholder engagement.
For 2018 and 2019, Matambo said positive economic growth rates are expected, driven largely by the non-mining sectors.
Matambo also indicated that that the economy seems to be doing well in terms of inflation, which has continued to be stable for years, remaining around the lower bound of the central bank’s inflation objective range of 3 – 6 percent.
“Low inflation is supportive of our economic growth objective, which envisages more goods and services and services being produced by the private sector and as a result, increasing opportunities,” said the minister.
Good performance of the non-mining sector is expected to continue while diamond production volumes are expected to grow by three percent in the medium-term while diamond prices are likely to go up, according to Ndobano.
Ndobano said it is anticipated that business and consumer confidence will grow, arising from supportive fiscal policies and government reforms.