The International Monetary Fund (IMF) says that Botswana’s economic growth will pick up in the near-term mostly driven by the mining sector.
“Yet, over the medium term, absent bold fiscal and structural reforms, growth will remain around 4 percent, a level that is insufficient to achieve the authority’s objectives of reducing unemployment and transitioning to high-income status. Inflation is expected to remain within the Bank of Botswana’s target range,” IMF said in a press statement after its executives concluded visit to Botswana this week.
“The outlook is subject to significant downside risks, including potential disruptions from COVID-19, most of which will affect Botswana through diamond and SACU revenue. Over the medium and longer term, Botswana could also be affected by climate change,” it said.
The statement indicated that in the FY2020 budget, the first after the October 2019 general election, the authorities envisage resuming fiscal consolidation, mostly through reprioritization of capital spending, cuts in non-priority recurrent expenditures, and increases in fees, while the public wage bill will continue to increase.
“With a constrained fiscal position, the budget also acknowledged the need to transform the economy toward a private sector, export-led and knowledge-based growth model, and increase the efficiency of public spending while aligning the human and physical capital on the transformation agenda,” IMF said.
In 2019 lower mineral revenues delays in the needed fiscal adjustment, including the large increase in the wage bill, have contributed to a moderately overvalued exchange rate, and eroded buffers and savings for Botswana’s future generations, according to the IMF. “These challenges, together with a severe drought, have contributed to slower real GDP growth and a deterioration in the fiscal and external balances in 2019,” it said.