- Hails the P102 Billion budget as stimulation to economic growth
- Says effective implementation will however be very key
- Bank vows to swiftly deal with any threats to price and financial stability
Bank of Botswana, the government’s principal economic advisor and custodian of the country’s monetary policy has applauded Ministry of Finance big spending proposition, hinging Botswana’s economic growth prospects on the record P102 billion proposed budget presented early this month.
On 5th of February 2024, Minister of Finance Peggy Serame put before parliament a plus P100 billion proposed budget for the 2024/25 financial year, the biggest proposed spend in the history of republic.
In what Minister Serame calls a “stimulus budget”, this substantially increased spend is poised to deliver game changing programmes and projects as well as high –value strategic investment and will be a stepping stone towards Botswana ‘s high income status.
Total expenditure and net lending for the financial year 2024/2025 is projected at one hundred and two billion, two hundred and eighty million Pula (P102.28 billion). This compares with the revised 2023/2024 financial year amount of eighty-eighty billion, seven hundred and ninety million Pula (P88.79 billion).
This includes seventy-two billion, six hundred and ten million Pula (P72.61 billion) proposed for the recurrent expenditure and twenty-nine billion, seven and seventy-seven million Pula (P29.77 billion) for the development budget.
At the launch of the 2024 Monetary Policy Statement on Wednesday, Bank of Botswana Governor Cornelius Dekop said Botswana’s growth prospects will largely depend on effective and efficient implementation of government big expenditure programs articulated in the 2024/25 budget presented by Minister of Finance Peggy Serame on February 5th.
The domestic economy is forecast to grow by 4.2 percent in 2024, compared to an estimated expansion of 3.2 percent in 2023, as growth in the non-mining sector improves underpinned by, among others, improvements in electricity and water supply, as well as Finance, Insurance and Pension Funds sectors.
Governor Dekop highlighted that the effective implementation of the economic transformation reforms and stimulative government expenditure indicated in the 2024/25 Budget, alongside the Transitional National Development Plan would be supportive of economic activity through facilitating expansion of productive capacity, accelerating economic transformation and enhancing economic resilience.
The BoB Chief noted that Botswana’s monetary policy also remains largely accommodative. However, Dekop underscored that with the downside risks to global economic activity, weaker global demand and adverse impact of the Russia Ukraine war, the growth trajectory remains uncertain.
“Given that both monetary policy and fiscal policy are expansionary, immediate implementation of transformation initiatives and structural reforms are expected to raise prospects for faster growth and economic diversification” he said.
According to Bank of Botswana, enhanced productivity/innovation of industry and effectiveness of support institutions and service providers would help improve growth prospects for the economy in an environment of price and financial stability.
Governor Dekop said, reflecting and aligning this to the Mindset Change Campaign, for its part, the Bank will respond in a properly calibrated and timely manner to any threats to price and financial stability, while remaining committed to promoting economic development and welfare improvements through its various functions
Inflation is forecast to remain within the Bank’s 3 – 6 percent objective range into the medium term. The projection takes into account the base effects associated with the adjustment of administered prices in 2023, downward adjustment of domestic fuel prices on December 21, 2023, maintenance of a negative rate of crawl for 2024 of 1.51 percent, the projected appreciation of the Pula against the South African rand, as well as the downward revision of forecasts for international commodity prices and trading partner countries’ inflation.
According to the December 2023 Business Expectations Survey, the business community expects inflation to remain within the Bank’s objective range in 2024, implying that inflation expectations are well anchored.
Bank of Botswana underscored that in the overall, the recent and prospective developments for both domestic and external economic activity suggest that the prevailing accommodative monetary policy stance is consistent with inflation remaining within the Bank’s 3 – 6 percent objective range in the short-to-medium term.
In the context of projected higher inflation in Botswana than in the trading partner countries and the economy operating below potential in the short term, Bank of Botswan’s assessment is that measured depreciation of the Pula against trading partners is consistent with maintenance of domestic industry competitiveness and positive for growth prospects; hence implementation of the exchange rate policy will entail a 1.51 percent downward rate of crawl in 2024.
