Don’t panic, Serame urges amidst struggling fiscus
Lewanika Timothy | Monday August 19, 2024 06:00
This sharp decline has sparked widespread concern about the fiscal trajectory of the fund. Despite these concerns, the Minister of Finance maintains that the nation's finances are not in the red.The financial downturn of the GIA comes at a critical time, as government has initiated a stimulus budget for the 2024–2025 financial year. According to Finance Minister Peggy Serame, this is necessary to bolster economic growth following a subdued economic period due to the pandemic and ongoing geopolitical tensions.
Delivering a statement to calm widespread concerns over the status of the reserve this week, Serame told Parliament that government spending has been on an upward trajectory despite depressed revenue streams. She pointed out that significant capital has been pumped into state-owned enterprises and various initiatives, even as revenues continue to shrink.
“Government spending has substantially increased due to, amongst others, payment of personal emoluments of P5.75 billion, expenditure on Botswana Public Officers Pension Fund of P1.5 billion for pension augmentation, a tariff subsidy to the Botswana Power Corporation for P1.5 billion, payment for acquisition of land from Tati Limited Company of P939.3 million, P623.1 million for water projects, Chema Chema Funds of P200 million, and Air Botswana P123.5 million for purchase for additional fleet,” she said.
However, Keith Jefferies, an economist at Econsult, believes that government’s expenditure represents an unsustainable pattern of investing in projects and assets that do not yield high returns. Speaking at a Botswana Insurance Fund Management (BIFM) economic update this week, Jefferies criticised government's undoing of a continued tendency to spend capital on low-return projects, calling for a re-streamlining of budget priorities.
“It’s time to apply some expenditure restraint, government cannot continue to spend large sums of money on projects that do not have any returns,” he said.
While Serame is optimistic about an economic rebound in 2025, she acknowledges the need for governement to re-think budget priorities. This will include cutting down on planned conferences, travel, and other projects that have been lined up to eat from the already shrinking GIA this year.
Econsult researchers, in their economic commentary, also revealed that spending cuts are unavoidable, suggesting that the development budget, allocated to various projects, should be reviewed.
“Spending this much on development projects would not be wise, given that most of them have not been subject to proper appraisal and in many cases the preparation has been rushed. “As the IMF commented at the end of the 2024 Article IV mission, execution of the development budget should be slowed and focused on high-return projects,” the Econsult researchers stated.