- Western sanctions on Russia prove a boon for Botswana as mineral revenues rise
- SACU receipts BoB’s income reported in line with 2023/24 budget projections
TLOTLO KEBINAKGABO
The government has reported a budget surplus of P5.2 billion recorded in the first quarter of the 2023/24 fiscal year.
According to the Bank of Botswana’s (BoB) Monetary Policy Report of August 2024 released recently, the surplus was largely driven by an unexpected boost in mineral revenues, especially from diamond exports filling the gap left by Western sanctions on Russian diamonds.
BoB attributed the robust revenue performance to “larger-than-expected mineral receipts” as diamond production was ramped up to compensate for the shortfall in global supply due to G7 and US sanctions on Russia.
Diamonds a critical factor
This surge in diamond production proved to be a critical factor in maintaining Botswana’s fiscal health during the period.
In addition to mineral revenues, other major streams like Southern African Customs Union (SACU) revenues and the central bank’s own income were reported to be in line with the 2023/24 budget projections.
The report highlighted that “total government expenditure and net lending was P19.2 billion, lower than the P21.8 billion anticipated in the budget” and contributed to the overall budget surplus.
Huge deficit projected
Despite the positive first-quarter results, the report has cautioned that the fiscal year might end in a deficit, projected it at P7.1 billion for the 2023/24 fiscal year, equivalent to 2.6 percent of the country’s Gross Domestic Product (GDP).
“For the 2023/2024 fiscal year, it is expected that the deficit will be P7.1 billion,” said the report, attributing the forecast deficit to increased recurrent spending and infrastructure investments.
In April 2023, the government implemented a 5 percent salary increment for public service employees, contributing to the higher recurrent spending.
Infrastructure gaps
Additionally, development spending focused on addressing infrastructure gaps, particularly through implementation of delayed projects from the previous fiscal year.
The aim was to “unlock economic growth” by improving infrastructure, which the government considers essential for long-term development.
The report also revised the projection for total government expenditure and net lending upwards by 1.6 percent to P88.8 billion, or 31.8 percent of GDP, a figure that slightly exceeds Botswana’s fiscal rule that limits total expenditure to 30 percent of GDP.
Not inflationary
However, the report emphasised that “the increase in expenditure and net lending is lower than the change in the consumer price index, hence not inflationary”, and therefore should not contribute significantly to inflationary pressures.
Meanwhile, Botswana’s diamond production faced challenges in the second quarter of 2024.
Debswana Diamond Company, the joint venture between the government and De Beers, produced 4.7 billion carats of diamonds, marking a 19.2 percent decrease from the 5.8 billion carats produced in the same period in 2023.
Lucara’s special stones
The report attributed this decline to “unfavourable global economic conditions and geopolitical events” that affected production levels.
Debswana’s production target for 2024 is set at 20.7 million carats, down from 23.7 million carats in 2023. By contrast, Lucara Diamond Corporation, which operates Karowe Mine, reported a 12.2 percent increase in production, totalling 93,560 carats in the first quarter of 2024.
This boost was “mainly attributable to the increased number of special stones,” particularly those weighing more than 100 carats, the report noted.