Govt revenues in coma

SHARE   |   Thursday, 30 July 2020   |   By Bakang Tiro
Dr Kganetsano Dr Kganetsano

The Director for Research and Financial Stability at the central bank, Bank of Botswana (BoB), Dr Alex Kganetsano forecasts that government’s sources of revenue will undue a heavy decline this year.

Dr Kganetsano indicated that in the middle of the sluggish economic growth in the first quarter of 2020 also characterized by Covid-19 devastation, government needs to diversify its revenue.

The BoB Head of Research made these sentiments while presenting the bank’s annual report recently.

He said government’s major sources of revenue – being minerals particularly diamonds and the Southern African Customs Union (SACU) revenue pool – are currently exposed to volatility.

“We haven’t seen any changes in the government’s source of revenue for a long time. Also, the challenges offered by Covid-19 limit economic activity. There is no sustainability now in both SACU and mineral income, hence government would lose more from these two pools,” he said.

Dr Kganetsano observed that a drop in mineral revenue would put pressure to the SACU pool as government would be more reliant on it to drive economy but it will not withstand the burden.

“The SACU revenue share pool is estimated to be at P3.5 billion per month against the higher import bill projected to be around P5.5 billion on monthly. Foreign reserves are declining. The GDP slowed to 2.6% in March 2020 related to 4.5% faster growth in March 2019,” he added.

Therefore, he stressed that the notion of economic diversification needs to be executed more than ever before, adding that the economy is still less diversified as well as vulnerable to shocks.

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As an endeavour by government to resuscitate the bedridden local economy, Citizen Economic Development Agency (CEDA) has recently rolled out revised guidelines so as to speed up domestic investment.

Part of the CEDA new guidelines package include reduced interest rate by 3% for the small scale businesses in areas such as manufacturing which Dr Kganetsano view as crucial shock absorber.

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The private sector also through Business Botswana unveiled its economic recovery plan which anticipates to position the sector as driving force for economic makeover post Covid-19.

An economic outlook for Botswana’s economy amidst the impacts brought by Covid-19, show a decline in tourism activity, reduced export commodity and export earnings.

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For Botswana, he averred the pandemic poses added uncertainty and challenges given the country’s vulnerability to shocks, notably diamond prices and demand.

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“Mining output contracted by 6.1 percent in2020, compared to a growth of 5.5 percent in 2019. Non-mining GDP grew by 3.6 percent in 2020 (4.3 percent in 2019). Overall, growth of the non-mining sector was mainly supported by finance and business services sector,” he said.