- From a budget surplus of P5.3 billion in 2015, Botswana recorded a budget deficit of P7 billion in 2016
- In 2017 Botswana could record a P1.3 billion deficit which could increase to P3 billion in 2018 and P3.8 in 2019
Fitch Group’s Business Monitor International (BMI) has projected that Botswana could experience wider fiscal deficits, saying the current government could spend more public funds into projects and policies which are intended to help the ruling Botswana Democratic Party (BDP) retain power in 2019 general elections.
Figures from BMI Africa report released this week show that from a budget surplus of P5.3 billion in 2015, Botswana recorded a budget deficit of P7 billion in 2016. The figures further show that in 2017 the country could record P1.3 billion deficit which could increase to P3 billion in 2018 and P3.8 in 2019.
In the report BMI analysts said the ruling BDP which has been in power since independence, faces rising risks and there are high chances that it will be unable to retain its power in the 2019 general election. The analysts indicated that the ruling party has done successively worse in each election since 1965, now holding only a small majority in parliament; they also noted that the lack of inclusivity of economic growth and high unemployment, especially among young Batswana, is a major reason for the fall in popularity of the BDP. “With unemployment unlikely to fall rapidly in the next two years, there is an elevated likelihood that 2019 will be the moment when the transfer of power finally takes place. “The opposition looks poised to finally unseat the ruling Botswana Democratic Party in the 2019 general election and we see a risk that fiscal policy will be loosen aggressively in the run-up to the vote as the BDP attempts to shore up support,” said BMI analysts in the report.
The analysts indicated that the performance of the economy over the next two years will play an important role in the outcome of 2019 elections and said there is a risk that the government will increase spending in a bid to maintain BDP support. “We could see increased government spending in an attempt to boost the economy and hold on to power. Such an outcome could backfire by leading to higher inflation and deterioration in living standards.”
It has been projected that Botswana could record GDP growth of 4.6% and 4.5% in 2017 and 2018 respectively, and BMI states that the growth was going to bode well for the ruling party if it was inclusive and leads to a fall in unemployment.
Economic growth has left many Batswana behind, as evidenced by high rates of unemployment and extremely high-income inequality including poverty and there has been concerns that for a country that has been hailed as an “African success story”, the results of economic growth, economic transformation and inclusive economic growth are disappointing and a significant portion of the population is not happy. The analysts say two years is a short amount of time to suddenly start seeing positive changes and address concerns of the population and the BDP is under pressure to show tangible signs of delivering developmental strategies to significantly bolster its position heading into the elections: “The possibility that the BDP could lose power in 2019 may lead the authorities to increase the resources devoted to developmental strategies, which focuses on education, social services and infrastructure and this could result in higher inflation and wider fiscal deficits than we currently anticipate.”
World Bank and International Food Policy Research Institute (IFPRI) recently criticized Botswana government for its obsession with managing threats that could result with the BDP losing power in the coming elections, instead of focusing on improving investment climate. The institutions say while businesses remain constrained by electricity shortages and inadequate internet connectivity and bandwidth, government is spending extensively on rural roads and infrastructure which yields limited economic benefits. The organizations indicated that as the BDP gains its strongest support in rural areas, the governing party is spending more on rural infrastructure that directly benefits its electoral base, rather than the economy as a whole. They added that several much-needed reforms that would help to address economic concerns could result with shortage of funds to keep the BDP’s support base.