The Minister of Finance and Economic Development Dr Thapelo Matsheka has regretted the devastating effects that the Covid-19 pandemic has cast on government revenues this year.
Dr Matsheka said government revenues would fall from P62.4 billion to P52.3 billion in 2020\21 financial year due to the big decline in mineral revenue from P20 billion to P10.5 billion.
The Director for Research and Financial Stability at the central bank, Bank of Botswana (BoB), Dr Alex Kganetsano conceded that government’s major sources of revenue will be deeply hurt.
Dr Kganetsano while giving economic forecast during the bank’s launching of annual report recently said that Southern Africa Customs Union (SACU) and mineral revenue were exposed.
He emphasized that two major revenue pools are exposed to volatility due to Covid-19 crisis.
To this end, Dr Kganetsano said the notion of economic diversification should become a real reality, urging government to diversify its revenues away from minerals.
Meanwhile, Botswana Federation of Public Sector Unions (BOFEPUSU) president Johannes Tshukudu said the pandemic affected the economy and therefore there is need to bank on local streams.
Tshukudu said BOFEPUSU has been closely monitoring the economic trends during the period of State of Emergency (SOE), buttressing the need for economic diversification.
“It has been expected that government will lose big but this causes concern for the workers. We were against the extension of SOE. Amid losses it will cause more harm,” he said.
Briefing World Bank Vice President for Eastern and Southern Africa, Hafez Ghanem, Matsheka said reduction in mineral revenue worsened the budget deficit projected to be at P13.6 billion.
“For Botswana specifically, the pandemic has had a massive and negative impact on economy, primarily due to the severe contraction of the global diamond industry as well as travel and tourism, the country’s two major sources of revenue,” added Finance minister Dr Matsheka.
He went on to say that the GDP contracted by 24 percent year-on-year in second quarter of 2020; a large contraction but in line with expectations. In 2020 GDP is anticipated to fall by 9 percent.
To moderate against emerging devastating effects, the minister said government approved the Economic Recovery and Transformation Plan which is intended to support recovery and growth.
He said preparatory work to implement transformative projects has since commenced.
“Government approved the industry support facility to the tune of P1.3 billion. The facility will support general business with operating expenses and address other critical needs. These measures explain the large amount of deficit that is projected,” he said.
Government has since developed a comprehensive financing plan to pay for the economic recovery package, including the recent approval to raise the government’s local borrowing limits from P15 billion to P30 billion.