Budget forecast to remain in surplus
Brian Benza | Tuesday September 23, 2014 15:34
Speaking at a Budget Pitso held last week, secretary for Finance and Economic Policy, Taufila Nyamadzabo, said the proposed budget for the 2015/16 financial envisages a small surplus of P1.4 billion or 0.8 percent of GDP.
“Total revenue and grants are projected to reach P52.8 billion, an increase of 5.3 percent from the proposed 2014/15 estimate of P50.2 billion.
On the other hand total expenditure and net lending is projected at P51.46 billion in 2015/16 from the estimated P49.3 billion recorded in 2014/15,” he said.
A P900 million-budget surplus is projected in the current 2014/15 fiscal years.
Next year, mineral and customs revenues are expected to increase modestly by 5.6 percent and 2.3 percent, respectively on the back of a recovery in diamond production, coupled with higher SACU revenues.
According to Nyamadzabo, the downside to the revenue forecasts emanates mainly from SACU revenues, as a lot hinges on the SACU region’s ability to import.
“The recent trouble in the South African economy can possibly dent the level of revenues that have to be shared as it is the biggest importer of goods in the Union.”
“On the other hand, the appreciation of the pula against the rand has potential to lessen the income Botswana receives.
In the past year, we received R19.2 billion, which was supposed to translate to P16 billion, but it ended falling down to P14.6 billion because of the pula movements. But of course the flip side to the Pula movements is that it also lessens our import bill in Pula terms as South Africa is our major import source market,” Nyamadzabo told Mmegi Business.
Under the central bank’s crawling peg exchange rate regime, the Pula has been gaining against the Rand, while depreciating against most other major currencies in the past two years. Despite the projected budget surplus in 2015/16, the country’s net financial assets position remains negative, as a result of accumulated budget deficits from the financial crisis period. The net financial assets, which reflect government’s balance sheet, is currently standing at a negative P7.7 billion with its debts greater than it’s accumulated financial investments, exposing the country to financial shocks.
In an effort to rebuild the country net financial assets, government will next year begin implementation of a fiscal rule review that will see expenditure curtailed with more diamond revenue allocated towards development projects.
From next year, 60 percent of mineral revenues, from 50 percent, will be invested in capital projects and 40 percent saved for future revenue.
As part of the fiscal policy changes, government will also contain the share of total spending to GDP under 30 percent in NDP11 and beyond. Previously, the fiscal rule set the government expenditure at a ceiling of 40 percent to the GDP.
With regards to revenue, the fiscal rule envisages collection of a minimum of 30 percent of non-mineral revenues to non-mining GDP to ensure adequate availability of non-mineral revenues to finance recurrent expenditures.
On the positive side, Nyamadzabo said the share of the proposed budget for the 2015/16 financial years to GDP stands at 31.4 percent, which is close to the 30% limit that government committed to achieve in NDP 10. “However, non-mineral revenues are insufficient to finance the recurrent spending, resulting in some mineral revenues expended to cover the recurrent budget and therefore not available for savings for future generation as envisaged in the fiscal rule,” he added.