At a time when the economy is at a crossroads, political party manifestos seem to consider the word “debt” too inappropriate for an election year and are accordingly bereft of it and dispenses with everything necessary to address the crisis, writes DOUGLAS RASBASH, Special Correspondent to The Botswana Gazette
Botswana’s economy is at a crossroads. Debt is climbing steadily, tax revenues are dwindling, exports are falling, and the Pula is losing value. Yet, in this election season, the word “debt” is conspicuously absent from any manifesto.
Instead, parties are dreaming of mega projects, believing they can outspend the crisis. Such a strategy is a pure act of faith. But growing debt is depleting our savings and is our unacceptable truth. This is more than irresponsible; it is surreal.
Botswana’s economic realities are becoming harder to ignore. Government debt has surged to P46,079.80 million, now representing 22% of GDP, a significant increase from 17% just last year. Simultaneously, government revenues have fallen to P24,387.90 million while spending has risen to P15,101.20 million.
With a -1% GDP growth forecast in the current year, these trends highlight a growing fiscal crisis that is worsened by a 35% drop in diamond revenues as global markets shift towards lab-grown alternatives.
Fragility
The country’s heavy dependence on diamonds, long its economic backbone, is showing its fragility, and immediate policy shifts are needed to secure Botswana’s future. The ruling Botswana Democratic Party (BDP) has historically relied on diamond revenues to fund public spending and development projects, thus keeping the electorate voting for ‘the ruling party.’
However, recent economic challenges demand a bold new approach. While the BDP may prefer incremental reforms, the escalating debt-to-GDP ratio and shrinking revenues could outpace such efforts.
In contrast, the opposition Umbrella for Democratic Change (UDC) may be more likely to confront these hard realities. The UDC has been vocal about diversifying the economy, advocating for policies that reduce reliance on a single resource and building resilience in other sectors like agriculture, tourism and energy.
Progressive stance
The party’s emphasis on structural reforms, coupled with its more progressive stance on economic policies, suggests it may be better positioned to tackle the diamond revenue collapse and growing debt burden.
Additionally, the UDC’s focus on job creation aligns with the need for innovation and sustainable growth in the face of dwindling traditional revenue streams.
Meanwhile, the manifesto of the BCP – which focusses mostly on social issues – assumes that government budgets can be stretched to fund its ambitious welfare and education programmes.
However, like the others, it ignores the over-arching issue of increasing debt. Addressing these economic challenges head-on will be critical for Botswana’s future stability, and any party serious about governance must face these issues rather that sweep them under the carpet.
Unsustainable debt
The reality is this: whichever party wins will inherit a nation teetering on the edge of spiralling unsustainable debt. But instead of facing the facts, our politicians seem set on making empty promises and avoiding the tough decisions needed to set Botswana on a path to fiscal health.
Debt might seem abstract, but its consequences are not. Inaction means our children will pay for today’s political pandering. Public services will weaken, economic growth will stall, and inflation will continue to erode what little purchasing power citizens have left.
Key Strategies for Debt Reduction:
- Implement Strict Fiscal Controls: It is time to rein in government spending. Each department should cut costs and prioritise essentials over luxuries. Mega projects must be delayed until we achieve budget stability.
- Diversify the Economy: Over-reliance on diamonds and mining has left the nation vulnerable to global shocks. We must rapidly shift towards value-added industries like manufacturing, green energy, and technology.
- Improve Tax Collection: Tax evasion and loopholes are costing the government billions in lost revenue. Strengthen the tax authority and close these loopholes to ensure fair contributions from all sectors.
- Reform Public Enterprises: Parastatals must become efficient or be privatised. These entities are draining the national purse, with little return on investment.
- Stimulate Exports: With exports falling, a targeted strategy for growing new export markets is crucial. Policies must incentivise innovation and entrepreneurship to make Botswana’s exports competitive again.
- Monitor External Borrowing: We must be wary of unsustainable external debt. Any new borrowing must be directed toward projects with clear returns, such as infrastructure that boosts trade and productivity.
- Strengthen the Pula: Restoring confidence in the Pula should be a key priority through disciplined monetary policy and rebuilding foreign reserves.
Botswana’s political parties must wake up. When your country is drowning in debt, pretending that it is not there will not make it disappear. The next government must not only confront the debt crisis head-on but act decisively to secure Botswana’s future. The electorate deserves the truth, not fantasies. Otherwise, the elephant conflict could go on a very different meaning.