A variety of measures will be implemented to restore Botswana’s fiscal balance and underpin long-term fiscal stability, the Minister of Finance and Economic Development, Peggy Serame, has said.
In her Budget Speech in Parliament this week, minister conceded that Botswana’s fiscal position has deteriorated in recent years, with substantial budget deficits. “These are partly related to the impact of the COVID-19 pandemic, but also reflect long-term structural trends and weaknesses that need to be addressed,” she said.
“The long-term trends show a progressive decline in fiscal revenues relative to the size of the economy, largely reflecting lower mineral revenues as the diamond industry has matured and the costs of mining have increased, combined with the volatility of revenues from the Southern African Customs Union.”
Serame noted that these two sources have historically accounted for almost two thirds of total revenues, saying domestic revenue generation from taxes, fees and charges has been relatively low. “The result of lower mineral revenues has been a structural change in the budget,” she said.
“Historically, budget deficits were infrequent, and would be balanced by subsequent surpluses. Now, budget deficits are persistent and structural, a situation that could eventually lead to an unsustainable level of public debt.
‘This cannot be sustained, and requires that both domestic revenue mobilisation and expenditure levels are addressed.”
To that end, Serame said, the government intends to extend the tax net and improve the efficiency of revenue collection. “Implementation of these measures gained momentum in the 2021/2022 financial year, and include revision of user fees and service charges across government,” she noted. “These will continue to be implemented in the 2022/2023 financial year.
“Attention will also be paid to ensuring that those who should pay taxes do so. Planned activities include a review of taxation laws to enhance efficiency and collections, use of ICT to improve collection efficiency, increased tax audits and inspections, and enhanced public education for taxpayers to achieve better compliance.”
Regarding fiscal expenditure levels, Serame emphasised managing them. “The expenditure budget will always face demands that are greater than the available fiscal resources,” she said. “Public spending is essential for stimulating the economy, providing public services, and financing investment that will provide public goods to support future growth and efficiency.”
Other measures will include the reduction and effective management of the government wage bill, reduction of subventions to SOEs, reduction of revenue support grants to local authorities and improved preparation and prioritisation of development projects.