Botswana: Africa’s Model of Fiscal Responsibility

Bank of Botswana

Shying away from international attention, Botswana has much to gloat about. Regarding democratic and economic stability, the Southern African nation has managed achievements others in the continent have not. A challenging 2015 and 2016 due to decreased mining activities has transformed into much needed improvements for 2017 and beyond.

Sources: Leanwords and Ministry of Finance and Development

The 2017 Budget comes in the context of negative growth and a shrinking current account surplus. Seventy-three per cent of the country’s total exports are composed of two minerals, diamonds and copper. Production of both contracted 16 per cent and 35 per cent respectively in 2015 due to reduced demand. Slightly less than 1-in-5 Botswanans are unemployed with inflation rising to 12 per cent in 2016.

Historically, Botswana has demonstrated strong fiscal disciple and currently has the highest sovereign credit rating on the African continent. The 2017/18 Budget seemingly continues with this tradition. With a relatively manageable deficit of 1.43 per cent of GDP, its revenue dependent budget aims to spur economic growth and reduce unemployment.

Revenues total 57.2 billion Pula, composed primarily of custom and excise taxes (30%), mineral revenue (29%) and non-mineral revenue (22%).

Sources: Leanwords and Ministry of Finance and Development

Botswana’s 39.6 billion Pula recurrent budget targets 4 principal ministries: Education, Health, Local Councils and Defense. Statutory spending such pension and debt servicing represent an additional 7 billion Pula, while the Development budget totals 16.5 billion.

Sources: Leanwords and Ministry of Finance and Development

Botswana expects increased mining activities to stimulate growth, projected to be 4.2 per cent in 2017. Volatile commodity prices, such as copper, pose a downside risk to projected growth.

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