We need to cut spending – Jefferis

Botswana’s government debt has surged in recent years, particularly since the COVID-19 pandemic, raising concerns over its sustainability. During a presentation at an India Botswana Chamber of Commerce and Industry (IBCCI) business dinner, Dr Keith Jefferis projected government debt to rise from P30 billion to P91 billion by the end of 2025/26 financial year. While there is no immediate debt crisis, as debt servicing remains a small proportion of GDP and government spending, the rate at which debt is increasing is alarming. Current estimates suggest that by the end of the 2025/26 financial year, government debt will reach 31% of GDP, a significant jump from 20% in March 2024. 

The statutory debt limit is set at 40% of GDP, but this includes government guarantees amounting to approximately 3–4% of GDP. The main challenge lies in the sustainability of this trend. Previously, Botswana relied on savings to finance budget deficits, but with reserves now depleted, deficits are being covered through borrowing. 

With the headroom for additional debt shrinking rapidly, projections indicate that Botswana could hit its debt ceiling by the 2027/28 financial year. This raises pressing questions about the country’s fiscal strategy and potential measures to curb excessive borrowing. 

“In terms of diversification, exports haven’t been diversified, and that’s where competitiveness becomes critical. The reason we haven’t diversified exports is that the government’s unwilling to make tough decisions focused on competitiveness. You can’t export successfully without competing. Policies don’t focus enough on the need to compete, and things like the high cost of doing business and dealing with the government make it tough for businesses to succeed. Productivity is also low, and labour costs are somewhat high. All of these things need to be addressed with some tough decisions. Botswana’s always been able to put off those tough decisions because of the profits from diamonds. 

For diversification to be competitive, he said, it has to be capacitated. “There are very few agricultural products that can compete in Botswana and that’s for obvious reasons; the weather is wrong, the soil is wrong, the rainfall is wrong, and I think the policy is wrong in the sense that the thinking is around very small-scale backyard gardening type of farming. Our agricultural production has really got to be efficient and large scale, it has got to be big! That’s why tomatoes come in from South Africa at whatever price they come in. And we have seen with citrus that it can be done. But I still think there is a limited number of agricultural products that can be exported competitively in Botswana. Look at potatoes, they are twice the price of imports. We just can’t do potatoes in this country,” Dr Jefferis said. 

Dr Jefferis was answering a question on the role of agricultural products in diversifying Botswana’s economy at an IBCCI business dinner. 

When presenting the 2025/26 budget on Monday, Vice President and Minister of Finance, Ndaba Gaolathe said as at December 2024 total public debt including sovereign guarantees amounted to P71.01 billion. 

“This consisted of P44.53 billion in domestic debt (P40.85 billion in securities and P3.67 billion in guarantees), and P26.47 billion in external debt (P21.24 billion in loans and P5.23 billion in guarantees). Total public debt as a proportion of GDP is estimated at 25.75 percent which is within the statutory threshold of 40 percent. However, this could worsen if the fiscal deficit persists into the medium term increasing the risk of sovereign debt distress,” the minister said. 

His ministry, he said, introduced a three-year Medium-Term Debt Strategy in the 2024/2025 financial year. 

“This strategy gives prominence to domestic resource mobilisation away from external borrowing, through the issuance of Government securities under the P55 billion Bond Issuance Programme. The strategy was motivated by the need to develop the local currency bond market and to provide investment options for repatriated funds following the amendment of the Retirement Funds Act, “he said.