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Botswana’s growth rebounds on higher diamond sales

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Gaborone, Botswana, June  9  (Infosplusgabon) - Botswana’s economic growth in 2018 is expected to rebound, supported by higher diamond sales, a stable macroeconomic environment, and higher government spending, according to a staff team of the International Monetary Fund (IMF).

 

“While the government balance is expected to deteriorate owing to lower revenues from the Southern Africa Customs Union and higher fiscal outlays, the deficit should be manageable given high levels of savings and foreign exchange reserves,” said an IMF statement issued Saturday following the team’s consultation with Botswana authorities from 22 May to 6 June in Gaborone.

 

Their discussions covered recent developments and prospects and focused on policies to increase the country’s economic growth and job creation while preserving monetary and financial stability.

 

“In this regard, medium-term prospects are favourable assuming a decisive and prompt implementation of key fiscal policy measures and market-friendly reforms that enable private sector development, lowers unemployment, reduces income inequality, and diversifies exports into selected sectors,” the IMF team pointed in the statement.

 

In recent years, Botswana’s diamond and government-led development model has been showing limitations with lower average GDP growth and slow job creation.

 

According to the IMF team, medium-term prospects are favourable assuming a decisive and prompt implementation of key fiscal policy measures and market-friendly reforms that enable private sector development, lowers unemployment, reduces income inequality, and diversifies exports in selected sectors.

 

In 2017, real GDP growth decelerated to 2.4 percent owing to declines in copper and nickel production and lower activity in construction and trade, while the fiscal and external accounts were nearly balanced, inflation was about 3 percent, the exchange rate was stable, the financial sector remained sound and well capitalized, and public debt continued to be low at about 19 percent of GDP.

 

“In the medium-term, and in line with their track record of prudent policies, the authorities aim at achieving a fiscal surplus. To this end, it will be necessary to undertake revenue and expenditure reforms alongside policies to reduce income inequality.

 

“On the revenue side, it would be important to remove many tax exemptions, increase property taxation, and consider making the personal income tax more progressive. On the expenditure side, it will be important to contain the growth of recurrent spending, improve the efficiency of social programmes, and protect public investment while prioritizing projects with the highest payoffs.

 

“In addition, the financial sector can be further developed to intermediate additional savings and lend to productive sectors by strengthening creditors’ rights, improving information on borrowers’ creditworthiness, increasing the issuance of government bonds to develop a reliable yield curve, and promoting mobile payments,” the team suggested..

 

In its 11th National Development Plan, Botswana focuses on private sector development and enabling growth in selected sectors needed to lower unemployment and diversify exports.

 

On this, the IMF team pointed out that diversification and job creation efforts require focus on prompt and bold market friendly reforms that can reduce the costs of doing business, improve skills in the labour force, make the public sector more efficient, privatize key enterprises, and enable competition and entry of firms in sectors with latent comparative advantage.

 

In this regard, the staff team welcomed the authorities’ recent announcements of their intention to liberalize visa and work permits’ policies, reduce bureaucratic requirements, and privatize inefficient enterprises.

 

“Ultimately, however, the success of these reforms will depend on the speed and determination with which they are implemented (including an accelerated passage of supporting legislation), together with accountability among government entities and enhanced monitoring and evaluation of results,” said the statement.

 

 

FIN/INFOSPLUSGABON/PLM/ GABON 2018

 

 

 

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