FOR IMMEDIATE RELEASE
WASHINGTON, DC – March 27, 2020. The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Botswana.
Please note: The Staff Report was prepared by an IMF staff team for the Executive Board’s consideration on March 9. The staff report reflects discussions with the Botswana authorities in November 2019 and is based on the information available as of February 21, 2020. It focuses on Botswana near- and medium-term challenges and policy priorities and was prepared before COVID-19 became a global pandemic and resulted in unprecedented strains in global trade, commodity, and financial markets. It, therefore, does not reflect the implications of these developments and related policy priorities. The outbreak has greatly amplified uncertainty and downside risks around the outlook. Staff is closely monitoring the situation and will continue to work on assessing its impact and the related policy response in Botswana and globally. We direct you to the attached documents that includes preliminary staff recommendations with regard to the COVID-19 global outbreak.
Persistently lower mineral revenues and SACU proceeds and delays in the needed fiscal adjustment, including the large increase in the wage bill, have contributed to a moderately overvalued exchange rate, and eroded buffers and savings for future generations. These challenges, together with a severe drought, have contributed to slower real GDP growth and a deterioration in the fiscal and external balances in 2019.
Growth is expected to pick up in the near-term mostly driven by the mining sector. Yet, over the medium term, absent bold fiscal and structural reforms, growth will remain around 4 percent, a level that is insufficient to achieve the authorities’ objectives of reducing unemployment and transitioning to high-income status. Inflation is expected to remain within the Bank of Botswana’s target range.
The outlook is subject to significant downside risks, including potential disruptions from COVID-19, most of which will affect Botswana through diamond and SACU revenue. Over the medium and longer term, Botswana could also be affected by climate change.
In the FY2020 budget, the first after the October 2019 general election, the authorities envisage resuming fiscal consolidation, mostly through reprioritization of capital spending, cuts in non-priority recurrent expenditures, and increases in fees, while the public wage bill will continue to increase. With a constrained fiscal position, the budget also acknowledged the need to transform the economy toward a private sector, export-led and knowledge-based growth model, and increase the efficiency of public spending while aligning the human and physical capital on the transformation agenda.
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.