Diamonds push budget into P2 billion surplus

• A surplus attained in the first quarter of 2023
• Growth credited to increased diamonds receipts
• GIA rises to P14.1 billion in February 2023

BAKANG TIRO

editors@thepatriot.co.bw

The 2022/23 budget performance for the 11 months to February showed a relatively strong fiscal position supported by higher-than-expected revenue amid an under-spending in the budget estimates, the Ministry of Finance has revealed in its 2023 first quarter comprehensive economic report.

The Ministry said generally revenues have exceeded projections for the period April-February while expenditures came in below budget estimates. Growth is attributed to strong demand for diamonds.

The result is a budget surplus of P2 billion for the period under review, compared to a deficit of P127.9 million that was recorded for the financial year 2021/22 and a deficit of P4.8 billion that was projected for the whole financial year 2022/23 budget year,” the economic report underscored.

It added that total revenues and grants amounted to P67.6 billion over the 11 months period from P59.7 billion the same period in FY2021/22, representing an increase of 13.1 percent.

“The growth in total revenue was largely attributed to increased receipts from mineral revenues, owing to strong demand for Botswana’s rough diamonds. In this regard, mineral revenue grew by 43.3 percent during the review period. Non-mineral income tax also increased during the period reflecting the effects of a 5 percent upward adjustment of public officers’ salaries effected in FY2022/23,” the ministry added.

Cumulatively, the realised surplus has contributed to an accumulation of Government cash balances held at Bank of Botswana by P3.2 billion. On the back of this, the report noted that the Government Investment Account (GIA) rose to P14.1 billion in February 2023, from P8.5 billion prior year.

“It is anticipated that the GIA will remain in a relatively good position by the end of FY2022/23. However, over the short term, the fiscal outlook remains uncertain owing to weak performance in the global economy and declining diamond prices. These could affect diamond revenues, with potential implications on the budget balance and accumulation of buffers needed to cushion the economy against potential future shocks to public finances,” stressed Minister Peggy Serame’s ministry.

Diamonds market

Turning focus to the diamond sector, the report indicated that while domestic growth prospects for 2023 are uncertain, the performance in the diamond market was mixed during the first quarter of the year.

“For instance, production was higher-than-expected while rough diamond sales were low. Latest data show that Debswana production, which accounts for over 60 percent of De Beers output, reached 6.9 million carats during the first quarter of 2023 from 6.2 million carats mined over the same period the previous year. This represented growth of 11.3 percent during this period,” it highlighted.

The increase in production is largely due to higher treated grade ore and increased processing levels at the Orapa plant than increased demand. Orapa mine has bolstered Debswana’s output.

For example, information contained in the Bank of Botswana (BoB) Monetary Policy Report for August pointed out that Debswana production for Q2 2023 increased to 5.8 million carats and it was primarily driven by increased processing of ore volumes at the Orapa Mine.

The surge in Debswana production level signaled a 5.6% increase as compared to similar quarter in 2022.

The BoB report said production at Lucara Diamond Corporation (Karowe Mine) increased by 4.8% to 90 497 carats in the second quarter of 2023 from 86 317 carats produced in the corresponding period in 2022.