Botswana’s 2025-26 budget aims for growth through diamond recovery and non-diamond mining resilience despite external risks. Revenue projections are P75.49 billion, with a deficit of P22.12 billion. Key focus areas include improved revenue generation, social welfare enhancements, infrastructure investment, and addressing unemployment. Increasing emphasis on education and climate resilience is essential for sustainable development.
Botswana’s budget proposals for 2025-26 target growth through diamond demand recovery and stability in non-diamond mining. However, geopolitical tensions and supply chain disruptions present risks. Inflation fell to 1.7 percent as of December 2024, remaining within the target range. The Bank of Botswana’s accommodative monetary policy, reflected in a 1.90 percent interest rate and zero reserve requirement, may require adjustments in response to ongoing external shocks. With foreign reserves dropping to P53.6 billion, of which only P2 billion is accessible for government use, fiscal vulnerabilities are a significant concern.
The government aims for total revenue and grants of P75.49 billion, largely driven by SACU transfers of P24.36 billion and non-mineral income tax at P19.01 billion. However, reliance on SACU is risky due to its volatility. A proposed 1.5 percent increase in corporate and top personal income tax is necessary to boost competitive revenue while maintaining a reasonable tax-to-GDP ratio, currently at 13%, below the African average. Improved VAT tracking and enhanced collection through BURS are crucial for better domestic resource mobilization.
Planned total expenditure is P97.61 billion, with P72.61 billion for recurrent spending and P23.75 billion for development. Key areas include infrastructure investment totaling P11.54 billion, targeting roads and healthcare facilities. However, the recurrent budget, mainly comprising salaries, highlights a need for greater efficiency. The budget aims to limit financial support for state-owned enterprises, promoting fiscal discipline while managing the potential impact on service delivery carefully.
Botswana’s budget for 2025 anticipates a deficit of P22.12 billion (7.56 percent of GDP), funded through domestic and external borrowing. Public debt is currently at P71.01 billion (25.75 percent of GDP), indicating possible unsustainable levels if deficits continue. A debt strategy focusing on domestic bonds over external options is proposed, contingent on developing a robust capital market.
Diversification beyond diamonds is emphasized, given the sector’s recent contraction. The forecasted GDP growth of 3.3 percent, alongside a resilient non-diamond mining sector, underscores urgency in alternative economic strategies. Initiatives promoting mineral beneficiation and support for projects like the Selebi-Phikwe Citrus could stimulate industry growth. However, existing industrial policies need coherence and stronger incentives for value-added sectors.
Tackling unemployment, notably among youth (38.4% jobless rate), is critical. Proposals to increase technical and vocational education enrollment aim to address skill mismatches, yet TVET institutions operate below capacity with a notable gender gap. Aligning training programs with emerging sectors is vital, as existing allocations for education and health yield less-than-optimal employment outcomes and further exacerbate youth unemployment.
The budget reinforces social welfare, raising the Old Age Pension and introducing support for newborns. While these measures aim to alleviate inequality, fiscal constraints limit their scope. Sustainable financing through reprioritization rather than increased deficits is essential, alongside robust systems for social safety nets and vulnerable group empowerment.
With P11.54 billion earmarked for infrastructure, projects will enhance roads, water supply, and energy generation. However, historical issues with cost overruns necessitate stringent project governance. Public-Private Partnerships (PPP) are expected to be integral, especially in energy initiatives aimed at generating substantial capacity over four years.
Although investments in renewable energy and water security are acknowledged, direct budget allocations for climate resilience measure remain insufficient. Strengthening sustainable agricultural practices and irrigation investments is essential, with significant projects like the Chobe-Zambezi Water Transfer Scheme expected to provide long-term solutions.
External factors such as global GDP growth and regional trade stability impact Botswana’s economy. While the AfCFTA presents export opportunities, customs inefficiencies need addressing to enhance competitiveness. To mitigate risks from fluctuations in diamond prices and geopolitical tensions, Botswana will need to strengthen trade logistics and industrial diversification.
Botswana’s 2025-26 budget emphasizes balancing fiscal discipline with economic recovery despite challenges. Key focal points include enhancing revenue collection, boosting infrastructure investment, and addressing persistent unemployment. Effective implementation of the outlined strategies will be pivotal in navigating volatility, supporting diversification efforts, and ensuring sustainable growth amid external shocks.
Original Source: www.mmegi.bw
