Botswana's economy faces challenges with weak diamond market

Source: Xinhua| 2020-02-01 00:07:04|Editor: zyl
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GABORONE, Jan. 31 (Xinhua) -- Weak diamond market and increased expenditures are expected to present a challenging fiscal year for Botswana, economists have indicated.

Researchers at Econsult a renowned local economic analysis firm on Friday said the reduced mineral revenue and ballooning expenditure coined around substantial public sector pay rise spread over 2019 and 2020, are some of the negatives expected to haunt Botswana, this year.

"This will have an inevitable impact on the availability of funds for development (capital) projects, at a time when expectations for new projects are high following the 2019 general election. The budget will need to focus on the delivery of public services, and the need to dramatically improve value for money in the public sector, to minimise the need to raise taxes to balance the budget," said Keith Jefferies, a prominent economist and his team of analyst on their latest report.

He warned that there have not yet been enough reforms to the business environment to jump-start private sector growth or attract significantly more foreign investment.

"As for growth expectations in 2020, we see real GDP growth for the year at a similar level to 2019, in a range of 3.5 percent to 4 percent. The 2020 budget is unlikely to involve an increase in government spending in 2020/21, in order to keep the fiscal deficit under control," said the researchers.

The analysts further said the country's mining sector has little scope to increase diamond production in 2020, given the high levels of inventory held by De Beers as a result of weak sales in 2019.

Despite the challenges, Econsult believes the government has a great opportunity to introduce important and much-needed economic reforms.

These include implementing real reforms to the business environment and getting rid of obstructive and unnecessary regulations, as well as winding up or reforming ineffective policies, programes and institutions."

The researchers indicate that any delay, the window of opportunity will be lost.

"Transformation implies change, and real change is always uncomfortable, at least for some, while providing opportunities to the majority," said the researchers.