25 December 2024
The Ministry of Finance intends to implement austerity measures in the medium-term, including reducing the civil service wage bill and cutting grants and subventions as a way of slowing down government spending and boosting savings.
Vice President and Finance minister, Ndaba Gaolathe, told the Youth Budget pitso recently that the measures were necessary to safeguard the economy against future shocks and mitigate the risks of unsustainable public debt levels. “
Central to this agenda will be efforts to rebuild fiscal buffers and implement robust expenditure management to ensure sustainability,” he said.
“By striking this balance, the government aims to create a resilient economy that is better prepared to navigate uncertainties while maintaining a clear focus on long-term growth and stability,” he added.
The measures will also include accelerating reforms of State-Owned Enterprises (SOEs) and implementing additional cost-containment measures.
Additionally, government intends to boost domestic resource mobilisation efforts, an effort that usually includes broadening the tax base and tightening revenue collections. Gaolathe said to enhance spending discipline and achieve fiscal sustainability, government was committed to revamping its fiscal strategy of safeguarding resources for future generations by spending less and saving more, ultimately building sustainable financial assets and replenishing fiscal buffers.
“Government will stimulate revenue growth by exploring alternative sources of income as well as developing sustainable financial assets to restore the Government Investment Account to levels that can effectively absorb future economic shocks.”
“This dual approach aims to enhance the country’s economic resilience and lay the foundation for long-term stability and growth,” he said.
The 2024-25 budget is expected to incur a deficit of up to P18.6 billion, up from the original forecast of P8.7 billion, after mineral revenues, particularly diamond sales, plummeted, while spending remained robust. The Government Investment Account, which is managed by the Bank of Botswana and represents government savings, has fallen to record lows as the Finance Ministry has drawn down deeper to finance the widening budget deficit. Government has also borrowed more on the domestic capital market to fund the deficit, in the process incurring higher costs as lenders have raised the levels of returns they seek in the debt programme.
According to the draft Budget Strategy Paper for the 2025-26 financial year, government expects a budget deficit of P11.4 billion, with revenues of P85.4 billion set against spending of P96.8 billion. Spending on grants and subventions, which are funds for SOEs and local authorities, is expected to reach P15.8 billion, unchanged from the current financial year. The civil service wage bill is expected to reach P36.7 billion, up from P35.2 billion in the current financial year.
Source: https://www.mmegi.bw/business/govt-warns-of-austerity-measures/news
