Budget shows first surplus in six years

27 Oct 2022

Botswana’s budget has recovered to a surplus from the P16.4 billion deficit in 2020/21, due to the rally in mining activity, particularly involving diamonds, according to the finance ministry.

Authorities had initially forecast the 2021/22 financial year to produce a deficit of P10.2 billion, representing 5.09% of GDP. Yet, higher than predicted mining revenues, an increase in revenues from the Bank of Botswana, and a development budget underspend bolstered the fiscal situation.

As global demand soared last year following the pandemic, Debswana – 50% government-owned – sold P38.1 billion worth of diamonds in 2021, the highest since 2016. In addition, state-owned Okavango Diamond Company revealed record sales of P11.5 billion last year.

However, despite the improvement to the government’s finances, a P7.7 billion deficit is forecast during the current financial year. A subsequent P163 million deficit is forecast in 2023/24, and the budget is set to balance in the 2024/25 financial year.

Fuelling the budget deficits over the years have been the pandemic, oscillating mineral and customs revenues and counter-cyclical government spending to boost the economy.

Earlier this month, the Ministry of Finance’s Director of Macro Economic Policy, Batane Matekane told the Local Authorities Budget Pitso that the upcoming financial year places Botswana at a critical point in terms of fiscal sustainability. The next financial year marks the first year of the NDP12 (National Development Plan 12), The Voice reports.

“The budget is proposed in the midst of considerable uncertainty, posing downside risks to the domestic outlook. Therefore, fiscal sustainability becomes more than necessary to underpin macroeconomic stability to provide financial resources to meet development needs,” she said, adding that despite the deficit reduction, the government will continue to borrow locally and externally.