A sharp drop in Southern African Customs Union (SACU) revenue will see Botswana recording a massive P8.50 billion in the budget deficit for the next financial year.
This is according to the 2022 Budget Strategy Paper (BSP) prepared by the Ministry of Finance and Economic Development.
The BSP serves as a precursor of upcoming government financial years and makes projections on budgets taking into consideration prevailing conditions.
The 2022/2023 fiscal deficit is anticipated to reach P8.50 billion or 4.0 percent of GDP, compared to P7.22billion or 3.7 percent of GDP in 2021/2022.
The main reason for the reversal is the sharp drop in SACU revenues, which was expected due to the overpayment in 2020/2021; however, this drop is anticipated to be a once-off.
It is said the increased deficit in 2022/2023 adds to the need for debt financing in the coming financial year.
A longer-term objective, the BSP says, is to rebuild the Government Investment Account (GIA) held at the Bank of Botswana, whether through borrowing or returning to budget surpluses.
It is expected that the fiscal impact of the pandemic will be felt at least for three financial years, with revenues expected to be below pre-pandemic projection levels from 2020/2021 to 2022/2023.
“Compared with pre-crisis trends, cumulative revenue losses from the pandemic are forecast to amount to around P25 billion (12.9 percent of GDP) over this period,” read the BSP.
At the same time, expenditure is projected at higher levels than pre-crisis, reflecting the cost of COVID-19 containment measures, economic and social support programmes, and the implementation of Economic Recovery and Transformation Plan (ERTP) projects, as well as recurrent costs arising from past development projects.
The medium-term fiscal projections released along with the 2021 Budget Speech in February had shown that Total Revenue and Grants were anticipated to reach P66.25 billion in 2022/2023, 2.6 percent higher than the 2021/22 budget figure of P64.56 billion.
However, owing to the persistence of COVID-19, which continues to weigh heavily on both the domestic and global economic performance, Total Revenue and Grants for 2022/2023 have been revised downwards by P3.19 billion and are now estimated to reach P63.06billion.
The bulk of this will come from the mineral revenue which is forecast to reach P24.08 billion, a downward revision of P1.66 billion from the initial estimate of P25.74 billion.
Custom and excise revenue is expected to reach P8.98 billion while revenue from Value Added Tax (VAT) and Non-mineral revenue is forecast to reach P11.78 billion and P14.94 billion respectively.
