World Bank approves further P2bn loan

Mbongeni Mguni | Monday June 26, 2023 06:00

In a statement on Wednesday, Marie Francoise Marie-Nelly, the World Bank country director for Eswatini, Botswana, Lesotho, Namibia, and South Africa, said the effects of the COVID-19 pandemic and other global shocks had made the need to diversify the economy, create more jobs, and rebuild fiscal buffers more urgent.

“We are pleased to support the government’s efforts to put Botswana on a more inclusive, resilient, and low-carbon growth path,” she said.

The $150 million loan is the second and last in a series which produced the $250 million (P3.3bn at current rates) funding in June 2021. Both loans represent rare occasions of direct budget support from the World Bank to Botswana, where external funding has largely been channelled to specific projects.

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 development policy financing provides important fiscal space and technical support to the government’s policy efforts under the Economic Recovery and Transformation Plan,” Finance Minister Peggy Serame said in a statement. “We are glad to work with the World Bank as a trusted partner to create a more resilient and inclusive economy that benefits Batswana.”

The latest World Bank funding comes as government warms up to external borrowing. According to recently published estimates, new foreign borrowing in the current financial year is expected to reach P5.5 billion, compared to P1.8 billion in 2022–2023.

Over the years Botswana has generally been hesitant to secure direct external debt for the budget, preferring to lean 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 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.

Late last year, the World Bank’s resident representative to Botswana, Liang Wang, told BusinessWeek the institution and its affiliated organisations such as the International Finance Corporation and Multilateral Investment Guarantee Agency stood ready to help Botswana at different levels of engagement and sectors.

Besides the development policy loans, the World Bank’s outstanding project finance to Botswana includes 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.