World Bank urges Botswana to invest more in infrastructure

Isaac Pinielo | Friday October 28, 2016 16:33

In the latest world development indicators and macro poverty outlook, the bank said the country should establish a trade and business environment, as well as immigration policies that encourage competition.

The bank stated that continued delays in upgrading electricity and water infrastructure will dampen non-mining activity, especially in the manufacturing sector.

“Over the medium-term, diversification of the economy and exports away from mining is a priority,” the bank stated.

According to the World Bank, structural reforms remain critical for the country in the medium-term to manage volatility and sustainability risks, including reforms in the water and energy sectors and addressing labour market distortions to spur private sector job creation.

It further stated that as long as growth is heavily dependent on commodity exports and public sector activity, Botswana will remain exposed to external shocks.

“Slowdown in major economies, particularly in China, would further constrain diamond and other commodity production, with follow-on impacts across government revenues, and the retail and service sectors,” the bank stated.

The bank advised that slowing revenue growth over the coming years, partly reflecting declining Southern African Customs Union (SACU) receipts, requires careful management of expenditure pressures, especially in relation to the wage bill.

The economy is expected to rebound to real growth near three percent this year and four percent by 2017, driven mainly by improved diamond sector conditions and continued fiscal stimulus that will propel non-mining activity.

Lower fuel and commodity prices, slower credit growth and weakening economic activity will keep CPI inflation at the lower end of the Central Bank’s band of three to six percent.  The fall in mining revenue is expected to gradually recover as developed economies stabilise.

However, SACU transfers are expected to remain soft mainly due to a weak near term economic outlook for South African growth.

The combination of strong expenditure growth and lower revenue is expected to keep the fiscal balance in the red for the next few years, and the current account surplus should continue to narrow in 2016 and 2017 on continued softness in the mining sector before gradual improvement, stated the bank.