Government plugs budget deficit with domestic funds
Brian Benza | Friday October 21, 2016 19:00
Available statistics show that government has been regularly drawing down on its deposits at the Bank of Botswana (BoB) with P3 billion having been withdrawn in the first three months of the 2016/17 financial years.
On the other hand, at least P2 billion has been borrowed from the local capital markets since June this year through issuance of government bonds and Treasury Bills.
“I don’t think there would be any need to seek any funding from outside Botswana this year,” said a senior government official.
The last time Botswana sought budgetary funding was in 2010 when it borrowed $1.5 billion from the African Development bank following the 2008/09 financial crisis.
Latest figures from the BoB show that government drew down about P3 billion in the first quarter of the 2016/17 financial year before replenishing the Government Investment Account (GIA) by P2 billion in July. Government deposits at the central bank currently stand at P35 billion as at July.
On the other hand, government has also been active in the bond market raising just under a billion pula in the June auction before issuing bonds and treasury bills worth P1.1 billion in the September auction.
At the June government bond auction, during which P907 million was raised, four bonds worth P407 million were reopened and a P500 million Treasury bill was also issued.
In September, yet another Treasury Bill was issued along with additional tranches of five government bonds.
The Treasury Bill offered amounted to P500 million and it was fully allotted. The five government bonds amounted to P600 million although some of them were not fully allotted.
During the 2016/17 financial year government aims to raise P48.4 billion, P3.4 billion lower than the estimated P51.8 billion that was raised last year, thanks to the government’s expectations of lower minerals prices and its dim view on customs and excise receipts. On the whole, total expenditure and net lending is budgeted at P54.4 billion, resulting in a relatively modest deficit of P6 billion or 3.6% of GDP.
Looking ahead, government might however be expected to seek foreign funding in the coming years as rolling budget deficits are seen printing to a cumulative P24 billion in the next three years.
Largely due to a P4 billion rise in development expenditure, government’s spending is expected to outweigh revenues in the 2017/2018 financial year by P6.8 billion or -4.1% of the GDP.
Deficits of similar magnitudes are seen until 2019 before the budget shortfall declines to -2.2% in 2020.
Speaking at a recent 2017/2018 Budget Pitso, deputy secretary for macroeconomic policy in the ministry of finance and development planning, Kelapile Ndobano said the deficits are attributable to the projected modest growth in revenues, and continued pressures arising from the implementation of the Economic Stimulus Package (ESP).
The projected total revenues and grants for 2017/2018 is P52.8 billion with P59.6 billion expenditure, of which, P40.8 billion is earmarked to cover the recurrent expenditure, while P18.9 billion is planned as development expenditure.