Govt. enlists domestic debt to finance deficits
Diamond rich Botswana will in the coming financial year and in future seek more debt in the domestic market, a development which has surely led to its salvation within the multi-billionPula fund management industry.
Peggy Serame, the Finance and Economic Development Minister, announced during the 2022/ 23 budget speech that, deficits, which are now a common occurrence to the country, will be financed by debt.
“This budget deficit will be financed through a combination of issuance of domestic Government securities in the form of bonds and Treasury bills, and external borrowing.
“Measures will be taken during the coming year to improve the functioning of the domestic debt market, to ensure that Government can raise funds locally to meet part of its borrowing needs,” the Finance Minister said on Monday.
The projected deficit for the upcoming financial year is estimated at P6.8 billion or 3.2 percent of Gross Domestic Product. During the budget speech presentation, Serame further told lawmakers that more loan authorisation bills will be presented for approval to Parliament in the coming financial year.
“However, I can assure Honourable Members that our borrowing will remain not only sustainable, and well within the legal limits set by the relevant legislation, but also responsible and channelled to national priorities to reach our national development objectives,” she said.
Botswana’s debt levels remain within the statutory limit of 40 percent of GDP. Botswana Guardian understands that government is in the process of preparing a new Medium- Term Debt Management Strategy, which will include enhanced debt monitoring instruments.
Botswana’s total debt is currently estimated at P45 billion, which is approximately 75 percent of the current budget estimates.
In the past, domestic fund managers raised concern because government continues to borrow externally while they ( local fund managers) have the necessary capacity to provide the necessary financial fall back.
In a bid to heed these concerns, at the July 2020 sitting, Parliament authorised an increase in the Bond Issuance Programme from P15 billion to P30 billion.
Meanwhile, Serame told parliament that, the total revenues and grants for the 2022/ 2023 financial year are expected to amount to P67.87 billion.
Of this amount, mineral revenue accounts for P24.08 billion, or 35.5 percent.
Non- mineral income tax is the second major source of revenue projected at P14.26 billion or 21.0 percent, customs and excise revenue is expected to amount to P13.94 billion or 20.5 percent, while VAT is estimated to amount to P11.97 billion or 17.6 percent of total revenues and grants.
Most revenue sources are projected to generate higher revenues in 2022/ 2023 than in the current year. The exception is customs and excise revenue, which is set to decrease by P405 million compared to the previous year, due to the expected adjustments to Southern Africa Customs Union ( SACU) receipts following previous over payments.