World Bank to consider P1.9bn loan to gov’t

Mbongeni Mguni | Monday November 28, 2022 06:00

Reaching out: Wang has been engaging various local authorities since he landed in Botswana to head up the World Bank’s office. He says his focus is how the World Bank can be a more effective implementation partner to help Botswana achieve its hopes of becoming a high income economy PIC: KENNEDY RAMOKONE

The loan will be the second and last in a series which produced the $250 million (P3.2 billion) funding in June 2021, a rare instance of direct budget support from the World Bank to Botswana. Both sets of funding are known as “development policy loans” which are tied to policy priorities the Bank and the receiving government agree to pursue.

The World Bank’s new resident representative to Botswana, Liang Wang told BusinessWeek work was progressing towards assessing the new loan.

“We expect that early next year, we may be able to submit the package to our board for approval, then work with the government for the disbursement of funds,” he said in an interview on Tuesday. “We need to align with the government process also because they look at their own books and their financing needs. “They have their budget process and we have ours.”

Wang said the second loan would generally pursue the same policies as the first, which include supporting the government’s recovery from the pandemic, strengthening private sector development and promoting a resilient, green recovery/

“That looks at issues such as targeting how to make sure the social systems work better, how to support private sector development, the efficiency of starting a business, access to finance for SMEs and others. “In terms of low carbon growth, it looks at supporting government in issues such as access to electricity by some of the vulnerable households and looking at off-grid solutions on the renewable side,” Wang said.

Over the years Botswana has generally been hesitant to secure direct external debt for the budget, preferring to leans on its reserves in lean fiscal times and avoid foreign-denominated loans. The traditional reluctance to borrow has protected government from conditions set by international financiers, which at times have been criticised bitterly by other African governments who have had to adjust their economic policies in order to secure loans.

However, unlike other African countries which have had tough conditions such as structural adjustment programmes imposed ahead of funding, concept notes and other documents from the World Bank suggest the conditions of both the first and the second development policy loans are largely supportive of the government’s own stated plans.

Botswana had a close funding relationship with the World Bank in the years after independence, but this gradually declined as the country’s budget was strengthened by the discovery of diamonds and other key minerals. Engagement with the World Bank has thus generally been tied to specific capital projects or technical assistance.

Wang said the World Bank and its affiliated organisations such as the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) stood ready to help Botswana at different levels of engagement and sectors.

“In his State of the Nation Address the President spoke about the private sector and Public Private Partnerships which is important because the public sector cannot finance everything, always. “This is where the World Bank can play a role because we have sister institutions that work with the private sector such as the IFC and MIGA. “We recently had an engagement with the PPP Unit, looking at the list of projects and trying to understand which are viable or reasonable. “This was an important engagement to screen ideas and work through and see how transactions can be done,” he said.

Besides the development policy loans, the World Bank’s outstanding project finance to Botswana include a partial credit guarantee of $242 million for Morupule B, another $186 million for the integrated transport project and a further $146 million for various water projects in the country.