No spills, no frills, few thrills

| Friday January 31, 2014 17:45

BRIAN BENZA & MBONGENI MGUNI

Staff Writers

he 2007/08 budget is memorable for being the last time a civil service wage increase was announced in the budget statement, while the 2008/09 paper remains known for marking the first allocation to the Directorate of Intelligence and Security.

Among other things, the 2013/14 budget will be remembered as being the shortest in history, being measured at a mere 17 pages from 34 pages two years prior. Judging by analysts' comments as gathered this week by BusinessWeek, Monday's budget could be an unremarkable or unmemorable affair.

According to the analysts, several factors are influencing this forecast, chief among them being that 2014 as an election year has already weighed on the budget process and the ability by fiscal authorities to make 'unpopular' or startling decisions.

'The last 2009/10 budget allowed a forecast deficit of P13.4 billion which was designed to support the economy in the first year of the global recession,' said a local economic analyst who declined to be named. 'However 2009 was also an election year and it's quite conceivable that the mammoth deficit, focus on poverty programmes as well as absence of punitive measures such as tax hikes, weighed on politicians' minds.

'In addition, the existence of policies such as prioritisation of self-liquidating projects, and the existence of a budget strategy paper clearly outlining the 2014/15 budget blueprint, mean the content of Monday's budget is more or less known,' the analyst said.'It is instead expected that with the 2014/15 budget strategy paper predicting a surplus, there could be room for a people-friendly budget containing increases in social safety nets, poverty programmes and other similar measures.'

With only two years remaining before conclusion of NDP 10 implementation, government core policy option going forward would be to optimise public resources allocation by ensuring that funds are only provided for implementing national priorities. Against this background, economic pundits say the remaining non-core activities should be outsourced to the private sector with government's effort therefore being directed towards addressing shortcomings currently inhibiting growth of private sector investment and local industry development.

'The rough diamond market, and in turn Botswana's mining sector, is expected to continue performing well during 2014/15,' he said, adding, 'This coupled with the slowing down of Botswana's non-mining private sector, means that the mineral revenues will be driving the growth of government revenue during 2014/15.'

Nemaorani noted that fiscal policy continued to be more effective than monetary in driving the economy, due to the public sector dwarfing its private counterpart. The economist was commenting on debate around the effectiveness of last year's four bank rate reductions in promoting growth, particularly as public spending was largely flat.

'I could imagine that in an economy such as Botswana's, where the private sector is dwarfed by the public sector, the transmission mechanisms of monetary policy are very weak,' he said.

'Notwithstanding, 2013 was characterised by falling inflation and so the central bank had to adjust the bank rate so as to keep real interests rates fairly constant.' For her part, Legae Investors' managing director, Kathleen O'Connell said Monday's budget would likely carry a deliberate focus on water and energy expenditure due to the troubles plaguing the two sectors.

'Both water and power are the backbone for investors as well as existing businesses,' she said.

'However, a lot will have to do with the prices of minerals which in turn are a function of global demand,' added O'Connell. The focus on water and energy is firmly within the finance ministry's stated priorities for the 2014/15 budget, which include completion of on-going projects and maintenance of existing infrastructure, investing in projects that promote economic growth and improving public service delivery. However, the biggest threat to the forecast balanced budget could turn out to be the very same factor, power crisis, that derailed the ministry's plans to post a marginal surplus in the current financial year, 2013/14.

Due to a persistent power crisis stemming from the delay in the completion of the Morupule B Power Station, government was forced to pump out over P1, 1 billion in unbudgeted funds to finance emergency power imports dragging the 2013/14 budget forecast into the red from the initially estimated marginal surplus. According to a government official, the power plant is still running at 50% capacity and a continued delay could again prove to have a denting effect on state coffers.

The 2010/11 budget is unforgettable for having unveiled a two percent increase to Value Added Tax, while the 2011/12 budget statement will stay in people's minds for putting money back in pockets via the upward review of taxable income levels.Among other things, the 2013/14 budget will be remembered as being the shortest in history, being measured at a mere 17 pages from 34 pages two years prior.

Judging by analysts' comments as gathered this week by BusinessWeek, Monday's budget could be an unremarkable or unmemorable affair.According to the analysts, several factors are influencing this forecast, chief among them being that 2014 as an election year has already weighed on the budget process and the ability by fiscal authorities to make 'unpopular' or startling decisions.'The last 2009/10 budget allowed a forecast deficit of P13.4 billion which was designed to support the economy in the first year of the global recession,' said a local economic analyst who declined to be named. 'However 2009 was also an election year and it's quite conceivable that the mammoth deficit, focus on poverty programmes as well as absence of punitive measures such as tax hikes, weighed on politicians' minds.

'This is not to say fiscal considerations are thrown out of the window during election years, but authorities are more sensitive to measures that may be viewed as unpopular, including tariff, levy and tax hikes.' According to the analyst, another factor weighing against the forthcoming budget's notability is the fact that it will be framed within the mid-term review of NDP 10, which is already published.'In addition, the existence of policies such as prioritisation of self-liquidating projects, and the existence of a budget strategy paper clearly outlining the 2014/15 budget blueprint, mean the content of Monday's budget is more or less known,' the analyst said.'It is instead expected that with the 2014/15 budget strategy paper predicting a surplus, there could be room for a people-friendly budget containing increases in social safety nets, poverty programmes and other similar measures.'With only two years remaining before conclusion of NDP 10 implementation, government core policy option going forward would be to optimise public resources allocation by ensuring that funds are only provided for implementing national priorities. Against this background, economic pundits say the remaining non-core activities should be outsourced to the private sector with government's effort therefore being directed towards addressing shortcomings currently inhibiting growth of private sector investment and local industry development.

The 2014/15 Budget Strategy Paper, published last November by the finance ministry, has forecast a surplus based on stronger tax and non-tax revenues. For his part, Econsult economist, Thabelo Nemaorani predicted that, as estimated by the budget strategy paper, Monday's budget could contain a surplus ranging from P2 million to P3 billion.'The rough diamond market, and in turn Botswana's mining sector, is expected to continue performing well during 2014/15,' he said, adding, 'This coupled with the slowing down of Botswana's non-mining private sector, means that the mineral revenues will be driving the growth of government revenue during 2014/15.'Nemaorani noted that fiscal policy continued to be more effective than monetary in driving the economy, due to the public sector dwarfing its private counterpart. The economist was commenting on debate around the effectiveness of last year's four bank rate reductions in promoting growth, particularly as public spending was largely flat.'I could imagine that in an economy such as Botswana's, where the private sector is dwarfed by the public sector, the transmission mechanisms of monetary policy are very weak,' he said.'Notwithstanding, 2013 was characterised by falling inflation and so the central bank had to adjust the bank rate so as to keep real interests rates fairly constant.

' For her part, Legae Investors' managing director, Kathleen O'Connell said Monday's budget would likely carry a deliberate focus on water and energy expenditure due to the troubles plaguing the two sectors.'Both water and power are the backbone for investors as well as existing businesses,' she said.'However, a lot will have to do with the prices of minerals which in turn are a function of global demand,' added O'Connell. The focus on water and energy is firmly within the finance ministry's stated priorities for the 2014/15 budget, which include completion of on-going projects and maintenance of existing infrastructure, investing in projects that promote economic growth and improving public service delivery. However, the biggest threat to the forecast balanced budget could turn out to be the very same factor, power crisis, that derailed the ministry's plans to post a marginal surplus in the current financial year, 2013/14.