21 February 2025
More government expenditure despite economic struggles. 2024/25 budget deficit projected at P24.73 billion.
Botswana’s economy contracted by 3.1% in 2024, a sharper decline than the 1.7% forecast by the government in December, Finance Minister Ndaba Gaolathe revealed the depressing news this week during his maiden 2025/26 budget speech.
Despite the economy already struggling as a result of low mineral revenue- particularly diamonds, which are Botswana’s main economic mainstay- the government has burdened itself with more financial commitments which will likely increase its expenditure.
The Umbrella For Democratic Change (UDC)-led government is under pressure to deliver on election promises, even as revenue streams dwindle. With close to 100 000 people registered under the old age pension, the P570 increment from P830 to P1400 means the government will fork out an additional P57 million monthly to cater for the increment.
As if that is not enough the government is proposing the introduction of a new infant allowance set at P300 until a child reaches 12 months old. Considering the number of 51 823 births registered in 2021 (according to VITAL STATISTICS Report), this social grant will also run into millions of expenditure annually.
Minister Gaolathe has acknowledged this grim economic reality.
“Consistent with global economic developments, the domestic economic performance remains subdued, directly impacted by the slump in the diamond market.
As a result, we find ourselves in a very tight fiscal space. The economy grew by 3.2% in 2023 compared to 5.5% in 2022, reflecting lower than expected global demand for diamonds.
In 2024, the domestic economy declined by 3.3% during the first three quarters of the year compared to a positive growth of 3.5% in the same period of 2023,” he said, adding that premised on the expected global recovery of the diamond market, Botswana’s economy is forecast to grow by 3.3% in 2025 which is below its potential.
As a result, the current 2024/2025 financial year is expected to record a much wider deficit of P24.73 billion following a sharp drop in mineral revenue (P8.70 billion from P25.19 billion). Furthermore, for the 2025/26 financial year, the deficit is expected at P22.12 billion following P75.49 billion in revenue and grants projected against P97.61 billion of total expenditure.
Despite the additional social grants and increment, Botswana’s foreign exchange reserves together with the Government Investment Account paint a gloomy picture. In 2020, foreign exchange reserves stood at P65.3 billion, while the GIA stood at P18.3 billion. However five years later, both have plunged to a historical low and fast declining, with nothing to cushion the nation amidst the difficult times.
“The Government’s financial position has also been deteriorating as financial buffers are down, and debt has accumulated. This trend is unsustainable and is questionable from an intergenerational perspective, as it means we are consuming assets now rather than preserving these for future generations.
We are determined to turn these circumstances around,” said Gaolathe, emphasising that the government remains resolute in committing to fiscal consolidation plans and rebuilding buffers.
As of December 2024, total public debt including sovereign guarantees amounted to P71.01 billion. This consisted of P44.53 billion in domestic debt, with P40.85 billion of that tied up in securities and P3.67 billion in guarantees, while P26.47 billion is in external debt, translating to P21.24 billion in loans and P5.23 billion in guarantees.
Source: https://rb.gy/h1h3d7
