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EU disburses P131 million to Gov’t

The European Union has disbursed P131 million (approx. 11.19 million EUR) to the Government of Botswana as part of its budget support programme for the on-going reforms in the education sector. The disbursement also supports actions taken to reduce the risks to the mother's life associated with pregnancy and childbirth and to increase the survival rate of infants and children under the age of five (Millennium Development Goals 4 and 5).

The payment was the seventh payment under the Human Resource Development Support Programme, which has to date disbursed 91.43 million EUR (approx 953 million pula) to the Government to support its efforts to reform the education system, the public finance management system and also in its work in achieving the Millennium Development Goals 4 and 5. This payment follows an assessment conducted at the beginning of the year with stakeholders from the ministries concerned, civil society and the EU Delegation in Gaborone. Different indicators that had been mutually agreed on were evaluated.

Progress was noted in the education sector related to the approval of several frameworks related to teacher training, rationalisation of the sector, multiple pathways and to access and retention of children in schools. These had been developed as part of the Education and Training Sector Strategic Plan (ETSSP). It was also noted that there is now more textbooks for students in primary schools, more teachers are trained to Diploma level or above, and more students finish seven years of primary education.

Ministry of Health and Wellness had achieved their indicator targets with for example  Community Health Workers reaching out to over 60% of families with children under five to relay health-related services and by revising a new strategy for Infant and Young Child Feeding and for Child health supervision guidelines and tools. There is now also more information publicly available on causes of maternal deaths, as a Maternal audit for the years 2012-2014 for all institutional deliveries has been developed and published as specified in another target.

However, the assessment also noted that there were delays in the implementation of the education sector plan, the ETSSP. It was further highlighted that as a consequence of the major reorganisation of the education sector in early October 2016, it is increasingly important that senior management of the Ministries in the education sector coordinate and cooperate across the ministries. There is otherwise a risk of a fragmentation of trainings offered to the detriment of the students. Moreover, insufficient progress had been made on the issue of the management of the tertiary grant/loan scheme that is currently eating up a disproportionate slice of the education budget to the detriment of primary education. In addition, drop-outs in Standard 1 had not reduced to the extent anticipated.

The implementation of the Public Finance Management (PFM) reform programme is also behind schedule, but progress was in particular noted with regard to fiscal transparency. With regard to macro-economic stability, it was noted that despite Botswana's stable macroeconomic situation, it is important that tax revenue reforms are accelerated and economic diversification is promoted. These should go hand in hand in with the reduction of the bureaucratic procedures and improved labour force skills in order to foster private sector development.

The programme is part of the 10th European Development Fund (EDF). The EU is currently looking into the possibilities for future cooperation with Botswana under the 11 EDF in the fields of vocational training, economic diversification, governance and support to local economic development (LED), especially with regard to tourism and the beef sector.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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