The funds, detailed in a Country Strategy Paper released this week, are expected to rise when authorities finalise the second part of an Economic Recovery Support Programme later this year. Under the first phase of the programme, government received $137 million (P1.5 billion) in September last year as post-COVID budget support.
According to the country strategy paper, the funding being made available by the AfDB is designed to support Botswana’s ambition to diversify its economy and speed up structural transformation for sustainable and inclusive growth.
Targetted project areas for funding under the 2022 to 2024 strategy paper include the budget support loan, the Glen Valley Wastewater Reclamation project, the 50MW solar photovoltaic plant and the Transport Support Programme where funding will go towards preparatory work for the provision of basic physical infrastructure.
Non-lending support will include support for regulatory reforms in the energy sector, building government capacity for Public Private Partnerships (PPP), helping the Botswana Stock Exchange to execute key capital markets development activities, and supporting the country’s climate change mitigation strategy and boosting women-led enterprises.
“Botswana’s overarching development challenge is the slow economic transformation with limited economic diversification, which is holding back its progress towards achieving high-income status by 2036,” reads a report by AfDB experts contained in the strategy paper.
The experts said the country strategy paper focusses on two mutually reinforcing strategic priority areas which include building economic resilience through support to economic governance and private sector development as well as quality infrastructure development for improved competitiveness and productivity.
“The strategy paper will facilitate private sector investment by emphasising an improved business environment for PPPs, and the provision of productive infrastructure,” the experts stated.
The AfDB’s documents and internal discussions supporting the strategy paper indicate that the bank initially made P869 million available for Botswana, before raising the figure to P1.4 billion. The debate around the budget to be made available appears to have also been influenced by the country’s traditional hesitance to take up external loans.
“It is great that the government does not need the bank other than in exceptional circumstances due to its prudent fiscal policy, available buffers for a rainy day, high credit rating and access to domestic and international markets,” read notes from the AfDB’s Committee on Operations and Development Effectiveness. “Botswana and the bank should take the consequences of this success in its planning. “To develop an eight-project Indicative Operations Project of which only two were approved does not seem a good use of the bank’s resources and time. “The bank should therefore clearly agree with the government on what they want from the Bank, what their expectations are.”
The committee also added that given the country’s conservative debt policy, the AfDB’s support should focus more on non-sovereign operations meaning those financing and investment operations that are not guaranteed by the state.
Since the onset of the COVID-19 pandemic, government has been covering its budget deficits through greater debt issuance in the local capital market. Resource to external financiers has been limited to the World Bank and the AfDB.
