## 1. Botswana is navigating a period of pronounced fiscal and economic headwinds. ## Source details **Canonical URL:** [1. Botswana is navigating a period of pronounced fiscal and economic headwinds.](https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025161.pdf) ## Other formats - [Markdown version](/-/media/files/publications/selected-issues-papers/2025/english/sipea2025161.pdf.md) - [Structured JSON version](/-/media/files/publications/selected-issues-papers/2025/english/sipea2025161.pdf.json) --- ### Fiscal pressures and public financial management (PFM) weaknesses - Diamond sector: traditional wealth-generating engine has come under increasing strain due to external shocks and structural vulnerabilities, resulting in diminished export receipts and lower government revenues. - Persistent fiscal deficits have progressively eroded Botswana’s fiscal buffers and more recently contributed to a rapid increase in public debt. - Technical problems with the Integrated Financial Management Information System (IFMIS) have constrained expenditure control, complicated budget execution, and reduced fiscal transparency. - Public procurement system deficiencies: - Fragmented procurement responsibilities between the Accountant General’s Department and the procurement authority, leading to unclear oversight and poor coordination with budgeting and planning functions. - Inefficient procedures and limited procurement capacity contribute to delays, cost overruns, and weak value for money. - Critical need: strengthen institutional arrangements, streamline processes, and build capacity to improve procurement performance and support more efficient public spending. ### Consequences of failing to address PFM shortcomings - Continued weaknesses in procurement, budget preparation and execution, financial reporting, and institutional coordination will undermine spending efficiency, leading to waste, delays, and poor value for money. - Heightened fiscal risks from gaps in fiscal controls and reporting, including the buildup of arrears and contingent liabilities. - Weak investment management will limit the growth and diversification impact of public spending. - Over time, these deficiencies would erode fiscal credibility, constrain the government’s ability to respond to shocks, jeopardize debt sustainability, and weaken development outcomes. ### Reform objectives and overarching strategy - Report draws on IMF technical assistance (including TADAT, PIMA, and financial reporting assessments) and sets out sequenced reform recommendations to: - Strengthen tax administration. - Improve public investment management. - Modernize budget preparation. - Enhance transparency and control over public finances. - Overarching objective: rebuild Botswana’s fiscal capacity so public policy can support economic transformation and long-term development. - Anticipated outcomes of implementing reforms: - Broaden the revenue base, reduce leakages, and mobilize resources more equitably and predictably through strengthened tax administration. - Improve expenditure efficiency via enhanced budget preparation and execution, containing deficits while safeguarding priority social and infrastructure spending. - Increase growth and diversification impact of capital outlays through more rigorous public investment management. - Bolster accountability, investor confidence, and anchor expectations about debt sustainability through greater transparency and improved financial reporting. - Collectively strengthen fiscal discipline and enhance macroeconomic stability to finance development goals without compromising long-run sustainability. ### Tax Administration Diagnostic Assessment Tool (TADAT) — summary and findings - TADAT assessment: 2021 Tax Administration Diagnostic Assessment Tool evaluation provided an objective analysis of tax administration effectiveness and established a baseline for reform. - Strengths identified: - Taxpayer registration system contains extensive and detailed information about registered taxpayers, forming a solid base for compliance monitoring. - Legal and regulatory framework provides a strong foundation with clearly articulated laws and a well-defined mandate for BURS. - Significant weaknesses identified: - Compliance risk management is underdeveloped; lack of a systematic, risk-based approach to enforcement. - Audit selection process remains largely manual, limiting efficiency. - Taxpayer services fragmented, supported by limited outreach and education initiatives despite improved call center responsiveness. - Lekgetho Live Tax Information System (TAX IS) introduced in 2020 faced flawed data migration, usability concerns, and varied staff acceptance. - Integration of customs and domestic tax functions led to inefficiencies, unclear accountability, and chronic understaffing in domestic tax divisions. - February 2022 post-TADAT mission recommendations: - Develop a systematic compliance risk management framework and modernize audit selection practices. - Establish a dedicated Taxpayer Services Department and expand outreach initiatives to encourage voluntary compliance. - Undertake an external review of the TAX IS platform to resolve usability and data migration challenges. - Realign BURS organizational structure to provide clearer separation of functions between customs and domestic tax divisions. ### ICT, taxpayer services, and revenue mobilization recommendations - TAX IS (introduced in 2020): expected to modernize tax administration but hampered by flawed data migration, inconsistent usability, and varied staff acceptance. - Recommendation: conduct an external review of the TAX IS system and implement necessary improvements. - Taxpayer service and outreach: fragmented across multiple departments; improved call center responsiveness noted but broader engagement and customer service initiatives need expansion. - Recommendation: create a unified Taxpayer Services Department to develop a coherent strategy for outreach and voluntary compliance. - Data analytics: greater use of data analytics recommended to strengthen risk assessment and operational efficiency. ### Roadmap for reform and strategic priorities - BURS mid-term review of 2019-2024 strategic plan identified priorities: enhancing compliance enforcement, optimizing organizational efficiency, and leveraging digital transformation. - IMF 2022 mission found reform progress slow due to leadership changes and inadequate execution mechanisms. - Proposed Transformation Roadmap: focus on short-term actions to improve revenue collection and tax administration effectiveness. - Strategic reform agenda centers on three actions: - Develop a clear compliance improvement plan with measurable outcomes. - Enhance use of risk-based tax administration to improve audit effectiveness and enforcement outcomes. - Accelerate reforms to modernize BURS’s operational framework and align revenue administration with international good practices. ### Public Investment Management Assessment (PIMA) — scope and 2023 update - PIMA framework evaluates institutional design and effectiveness of public investment management across three key stages: (i) planning of investment levels, (ii) allocating investments to sectors and projects, (iii) delivering productive and durable public assets. - 2023 PIMA update for Botswana was conducted in September 2022 and evaluates PIM institutional strengths and weaknesses and provides practical recommendations. ### Trends in public investment and capital stock metrics - Public investment trends: - From 1990 to 2012, public investment averaged 35 percent of total investment. - Declined to 25 percent in the past decade. - Public investment peaked at 17 percent of GDP in 2009. - Public capital stock: - Reached 106 percent of GDP in 2019. - Per capita public capital stock was 50 percent above the EME average and ten times that of SSA (IMF estimates). - National plans: - Under National Development Plan 11 (NDP11), investments focused on roads, power, and water and sanitation; implementation was disrupted by COVID-19. - Draft Transitional National Development Plan (TNDP, covering 2023–2025) envisions renewed expansion in public investment, particularly in water and transport infrastructure. ### Key PIMA findings since 2017 - Progress since 2017: improvements in institutional structures, legal frameworks, and strategic orientation for managing public investments, but implementation remains weak. - Institutional strengths and gaps: - MFED plays a central role in public investment planning and budgeting; sector ministries and agencies execute projects. - Lack of coordination across entities leads to fragmented project execution. - Disconnect between national planning (NDP) and budget allocation due to competing national priorities and slow economic recovery. - Slow execution pace for key public investment projects driven by inadequate project management, lack of skilled personnel, and poor ministry/agency coordination. - Project selection and appraisal challenges: - Project selection criteria often unclear; decision-making lacks transparency. - Tendency to select projects based on political considerations rather than long-term developmental impact or alignment with national priorities. - Appraisal process is often ad hoc with limited use of cost-benefit analysis and investment evaluation tools. - National and sectoral planning processes not always aligned with budgeting; projects sometimes initiated without adequate feasibility studies or risk assessments. - Project implementation and monitoring deficiencies: - Development Project Monitoring System (DPMS) exists but is used inconsistently; detailed, timely reporting on project outcomes is lacking. - Monitoring data are often underutilized for decision-making or project adjustments. - Under-resourced project management capacity at central and sectoral levels contributes to frequent delays and cost overruns. - Common outcomes: delays in construction, maintenance backlogs, incomplete projects. - Asset management and sustainability shortfalls: - Insufficient focus on maintenance and sustainability once projects are completed. - Many infrastructure projects face significant maintenance challenges, reducing effectiveness over time. - Lack of a comprehensive asset management plan and clear strategy for managing public assets. - Inadequate resources allocated for maintenance leading to premature deterioration of infrastructure. ### Recommendations for reform (PIMA-related and cross-cutting) - Improve coordination between national planning and budgeting to ensure alignment of sectoral plans with national development strategy. - Strengthen project selection and appraisal by formalizing appraisal systems, increasing use of cost-benefit analysis, and ensuring feasibility and risk assessments prior to project initiation. - Enhance project implementation and monitoring: - Improve utilization of DPMS and other monitoring tools for timely reporting and adaptive project management. - Build project management capacity and technical skills at central and sectoral levels. - Develop and implement a comprehensive asset management strategy to ensure maintenance and sustainability of public investments. - Address procurement and PFM weaknesses noted elsewhere to reduce delays, cost overruns, and improve value for money in public investment projects. ### Key recommendations from the 2023 PIMA update - Improve project selection, enhance implementation and monitoring of public investments, and ensure long-term sustainability of infrastructure. - Target reforms across legal and institutional frameworks, project appraisal and selection, monitoring and evaluation (M&E), capacity building, and asset management to maximize developmental impact. ### Strengthening legal and institutional frameworks (paras. 24) - Refine the Public Finance Management Act (PFMA). - Ensure sectoral ministries have clear guidelines for planning, selection, and implementation of public investment projects. - Clearly define roles of various actors in the public investment process to improve coordination across ministries and agencies. - Improve alignment of national planning and budgeting processes by integrating national and sectoral plans more effectively with the budget process. - Enhance the capacity of the Ministry of Finance and Economic Development to oversee and coordinate the entire public investment cycle. ### Enhancing project selection and appraisal (para. 25) - Focus on transparent, evidence-based project selection where a gap to the efficiency frontier stands out (Figure 4). - Formalize project selection criteria. - Introduce robust cost-benefit analyses to help prioritize projects based on alignment with national development goals. - Ensure sector ministries have technical capacity to conduct rigorous appraisals to improve value-for-money outcomes and reduce politically or short-term driven selections. ### Improving monitoring and evaluation systems (para. 26) - Increase use of the Development Project Monitoring System (DPMS) and ensure monitoring data inform decision-making. - Enhance training of personnel responsible for monitoring and improve reporting processes for timely and accurate data collection. - Strengthen ex-post evaluation to assess effectiveness of completed projects and extract lessons learned. - Foster a culture of accountability and transparency in public investment management to ensure effective utilization of investments. ### Building capacity in public investment management (para. 27) - Develop a comprehensive capacity-building strategy for civil servants involved in project planning, implementation, and monitoring. - Provide specialized training in project management, public procurement, and asset management. - Explore partnerships with international organizations, such as the World Bank, for technical assistance to strengthen public investment management systems. ### Asset management and sustainability (para. 28) - Develop a comprehensive asset management strategy focused on maintenance and sustainability of infrastructure. - Allocate sufficient resources for maintenance and repair. - Conduct regular assessments of infrastructure conditions and develop long-term maintenance plans. ### Overall assessment of PIMA findings (para. 29) - Progress noted in strengthening institutional frameworks and improving project planning. - Significant gaps remain in project selection, implementation, and monitoring. - Recommended multi-faceted approach: legal reforms, better project selection criteria, and building institutional capacity. - Success depends on government commitment to transparency, accountability, and efficiency to maximize infrastructure investment impact. ### Improving the financial reporting framework — background and objectives (paras. 30–31) - Objective: improve comprehensiveness, frequency and quality of fiscal reports; strengthen fiscal oversight; align PFM information systems including the chart of accounts with international good practices. - Review covered Government Accounting and Budgeting System (GABS), digitalization advice, proposed CoA changes, and re-establishing financial reporting. - GABS has faced persistent operational problems since its 2018 upgrade, culminating in a critical breakdown in August 2023 when the General Ledger stopped updating. - System instability due to excessive customization, poor configuration, and recurring hardware and database failures. - Consequences: suspension of in-year and annual financial reporting for the last two fiscal years, disrupted payment processing, delayed supplier settlements and bank reconciliations. - Heavy reliance on vendors and consultants; governance weaknesses including absence of a service-level agreement between the Accountant General’s Office and the Department of Shared Digital Services. ### Key observations on financial reporting (paras. 32–34) - Fragmented financial reporting: Ministry of Finance produces annual cash-based statements, while EBFs, SOEs, and local governments maintain independent accounting systems with limited integration. - Inadequate Chart of Accounts (CoA): does not support economic classification, policy analysis, or inter-entity transactions; lacks standardization across ministries and departments. - Limited use of accrual concepts: reports emphasize cash flows and insufficiently incorporate accrual-based data (accounts payable, receivable, depreciation). Initial accrual steps exist (some SOEs adopting IPSAS principles) but no whole-of-government strategy. ### Recommendations for reform of financial reporting (paras. 35–38) - Urgent priority: restore reliable financial reporting for the Budgetary Central Government using available data from GABS, revenue agencies, and the Bank of Botswana. - Medium- to long-term: sustainable improvements and any move toward accrual accounting depend on a well-functioning, stable IFMIS. - Redesign CoA to align with GFS 2014 and IPSAS; codify financial relationships between parent ministries and dependent entities (SOEs, EBFs). - Introduce unique identifiers for government-to-government transactions to improve tracking and eliminate discrepancies. - Establish a new Financial Reporting Framework (FRF) to standardize reporting across all government entities: clarify roles and obligations, establish a uniform reporting calendar, and require systematic reconciliation between cash-based and accrual-based systems. - Issue a comprehensive Financial Reporting Manual (FRM) as operational guidance and update the Public Finance Management Act to make compliance mandatory. - Institutional strengthening and sustained capacity building: create a committee to oversee implementation and monitoring; reinforce internal audit and accounting units; enhance collaboration between the Accountant General’s Department and the Office of the Auditor General; provide training and upskilling in modern accounting practices. ### Implementation strategy and phased roadmap (paras. 39) - Short-Term Priorities: - Restore financial reporting (IFMIS) and finalize the CoA redesign. - Develop reporting templates based on IPSAS cash and accrual standards. - Initiate a gap analysis of existing IT systems and accounting processes. - Medium-Term Priorities: - Roll out the revised CoA across all budgetary and non-budgetary entities. - Adopt and pilot the Financial Reporting Manual (FRM) in key ministries. - Begin transition from cash-based to hybrid accrual reporting for selected areas (e.g., payroll, vendor payments). - Long-Term Goals: - Full adoption of accrual-based IPSAS reporting at the general government level. - Integration of SOE and EBF financial data into consolidated reports. - Regular publication of whole-of-government financial statements. ### Broader fiscal governance considerations (paras. 40–41) - Stronger reporting enhances fiscal transparency and investor confidence, enables better tracking of public debt and assets, and supports risk-based fiscal planning. - Consistent classification and monitoring of transfers to SOEs and dependent entities is critical for managing contingent liabilities and safeguarding fiscal sustainability. - Reform success requires sustained political support, inter-agency coordination, and investment in people and systems. - Phased, realistic approach recommended to balance ambition with capacity and institutional readiness. ### Ministry of Finance organizational assessment — scope and context (paras. 42–43) - Review assessed organizational strengths, gaps, and coordination issues across core PFM functions: macro-fiscal forecasting and policy, fiscal risk analysis, budget preparation, financial control and reporting, and reform coordination. - Triggered by deteriorating fiscal buffers and increasing macro-fiscal risks. - Findings: MoF lacks a unified structure for macro-fiscal policy management; PRDMU performs select forecasting and strategy functions but is not charged with below-the-line fiscal projections, comprehensive MTFF production, regular fiscal performance reporting, and macroeconomic policy analysis. - Institutional structure for fiscal risk management is underdeveloped. - Recommendation: establish a Macro-Fiscal Management Department integrating macro-fiscal policy, tax policy, debt sustainability analysis, and fiscal risk analysis; reconstitute the technical macro working group including relevant agencies; review and expand mandates of Tax Policy and Debt Management Departments. ### Budget preparation findings and recommendations (paras. 44–45) - Budget coordination in MoF is fragmented; responsibility split across divisions; recurrent and development budgets prepared separately, weakening budget unity. - Recommend establishing a dedicated budget coordination unit to streamline preparation, facilitate cross-department collaboration, and ensure adherence to the budget calendar. - Clarify MoF and National Planning Commission roles on PIM and set responsibilities in the budget calendar. - Budget challenge function undercut by limited capacity: only five desk officers manage challenge responsibilities for all MDAs. - Recommendation: augment desk officer capacity, training, and analytical capabilities to restore MoF's gatekeeping function. ### Financial control, accounting and reporting findings and recommendations (paras. 46–47) - Structural and operational weaknesses: outdated PFM legal framework, no consolidated financial statements since FY2021/22, incomplete or unreconciled in-year reports. - GABS technologically obsolete and poorly maintained; core manuals (accounting policies, SCOA guides) missing; weak internal controls causing financial losses. - Recommendations: - Strengthen the Accountant General’s Department (AGD) responsibilities for design and oversight of financial control, accounting and reporting framework. - Transfer procurement policy coordination to the procurement authority. - Strengthen the accounting systems management function to better manage and develop GABS and external application providers; expand AGD systems group. - Upgrade cash management and financial reporting capacities. - Procure a new IFMIS or reinstall GABS; implement an interim reporting solution urgently. - Increase Accounting Officers’ engagement with internal audit findings and decentralize financial control responsibilities. ### Cross-cutting functions and reform implementation (para. 48) - PFM reform implementation has been piecemeal and lacks strategic coherence; responsibilities are not clearly assigned; reform monitoring is weak; coordination unit underpowered. - Recommendations: - Place the reform coordination office under the Permanent Secretary and hold departmental heads accountable for outputs. - Integrate finance and accounting functions across MDAs. - Consolidate development partner coordination into a single unit to harmonize external engagement. ### Implementation roadmap and priority recommendations (paras. 49; table) - Report proposes 16 priority recommendations across macro-fiscal, budget management, financial control, and cross-cutting themes with short-, medium-, and long-term timelines. - Selected prioritized recommendations (preserving exact wording and timeframe/priority labels): - MACRO-FISCAL 1. Establish a stand-alone Macro-Fiscal Management Department, drawing on the existing capabilities of the Transformation Office, and expand role to cover all major macro-fiscal roles. — Short-term — High 2. Expand the mandate and build-up the capacity of Tax Policy and Debt Management Divisions. — Medium-term — Medium 3. Staff, train and direct PEEPA to carry out fully the SOE governance and oversight functions — Medium-term — High 4. Reconstitute the Technical Macro-Fiscal Working Group — Medium-term — Medium - BUDGET PREPARATION AND MANAGEMENT 5. Combine the existing budget coordination functions to guide budget preparation including development of the budget calendar and guidelines, and lead the rollout of budget reforms — Medium-term — High 6. Strengthen coordination of the recurrent and development budget, including the functions and responsibilities of the MoF and NPC — Short-term — High 7. Review institutional arrangements for budget decision making with a view to incorporate the early participation of key role players — Medium-term — High - FINANCIAL CONTROL, ACCOUNTING AND REPORTING 8. Strengthen the OAGs design and oversight of financial control, accounting and reporting framework — Short-term — High 9. Transfer OAG procurement policy coordination responsibilities to PPRA — Short-term — Medium 10. Strengthen the OAG’s systems function to manage and develop GABS and to manage external application providers — Short-term — High 11. Expand mandate of the Cash Management Unit for monitoring cash flows and guiding budget releases — Short-term — High 12. Strengthen arrangements and secure greater engagement of Accounting Officers with the internal audit findings — medium-term — Medium - CROSS-CUTTING 13. Review the arrangements for progress reporting and monitoring of the PFM reform strategy, relocate the coordination function to the Office of the PS — Medium-term — Medium 14. Review the current PFM reform strategy and elaborate aspirational but credible expectations, priorities, plans, etc. for the achievement of proposed reform outputs — Medium-term — Medium 15. Implement arrangements to provide for a more integrated finance function in Ministries, Departments, & Agencies (MDAs) — Longer-term — Medium 16. Review opportunities to consolidate development partner coordination within MoF — Medium-term — Medium ### Strategic conclusion (paras. 50–51) - MoF must modernize its PFM framework to respond to deteriorating fiscal conditions and rising macroeconomic risks. - Institutional reform, analytical capacity, and strategic leadership are vital to enhance fiscal governance and sustain long-term economic stability. - IMF technical assistance recommends: modernizing tax administration, strengthening budget preparation and execution, improving public investment management, and enhancing financial reporting and transparency. - Implementation depends on strong political commitment, effective sequencing of reforms, and investment in institutional capacity to restore fiscal sustainability, rebuild buffers, and support Botswana’s long-term development goals. *Source: IMF staff report content summarized from the provided chapter.* ### 1. Botswana is navigating a period of pronounced fiscal and economic headwinds. The country’s ### 1. Botswana is navigating a period of pronounced fiscal and economic headwinds. ### Fiscal pressures and public financial management (PFM) weaknesses - Diamond sector: traditional wealth-generating engine has come under increasing strain due to external shocks and structural vulnerabilities, resulting in diminished export receipts and lower government revenues. - Persistent fiscal deficits have progressively eroded Botswana’s fiscal buffers and more recently contributed to a rapid increase in public debt. - Technical problems with the Integrated Financial Management Information System (IFMIS) have constrained expenditure control, complicated budget execution, and reduced fiscal transparency. - Public procurement system deficiencies: - Fragmented procurement responsibilities between the Accountant General’s Department and the procurement authority, leading to unclear oversight and poor coordination with budgeting and planning functions. - Inefficient procedures and limited procurement capacity contribute to delays, cost overruns, and weak value for money. - Critical need: strengthen institutional arrangements, streamline processes, and build capacity to improve procurement performance and support more efficient public spending. ### Consequences of failing to address PFM shortcomings - Continued weaknesses in procurement, budget preparation and execution, financial reporting, and institutional coordination will undermine spending efficiency, leading to waste, delays, and poor value for money. - Heightened fiscal risks from gaps in fiscal controls and reporting, including the buildup of arrears and contingent liabilities. - Weak investment management will limit the growth and diversification impact of public spending. - Over time, these deficiencies would erode fiscal credibility, constrain the government’s ability to respond to shocks, jeopardize debt sustainability, and weaken development outcomes. ### Reform objectives and overarching strategy - Report draws on IMF technical assistance (including TADAT, PIMA, and financial reporting assessments) and sets out sequenced reform recommendations to: - Strengthen tax administration. - Improve public investment management. - Modernize budget preparation. - Enhance transparency and control over public finances. - Overarching objective: rebuild Botswana’s fiscal capacity so public policy can support economic transformation and long-term development. - Anticipated outcomes of implementing reforms: - Broaden the revenue base, reduce leakages, and mobilize resources more equitably and predictably through strengthened tax administration. - Improve expenditure efficiency via enhanced budget preparation and execution, containing deficits while safeguarding priority social and infrastructure spending. - Increase growth and diversification impact of capital outlays through more rigorous public investment management. - Bolster accountability, investor confidence, and anchor expectations about debt sustainability through greater transparency and improved financial reporting. - Collectively strengthen fiscal discipline and enhance macroeconomic stability to finance development goals without compromising long-run sustainability. ### Tax Administration Diagnostic Assessment Tool (TADAT) — summary and findings - TADAT assessment: 2021 Tax Administration Diagnostic Assessment Tool evaluation provided an objective analysis of tax administration effectiveness and established a baseline for reform. - Strengths identified: - Taxpayer registration system contains extensive and detailed information about registered taxpayers, forming a solid base for compliance monitoring. - Legal and regulatory framework provides a strong foundation with clearly articulated laws and a well-defined mandate for BURS. - Significant weaknesses identified: - Compliance risk management is underdeveloped; lack of a systematic, risk-based approach to enforcement. - Audit selection process remains largely manual, limiting efficiency. - Taxpayer services fragmented, supported by limited outreach and education initiatives despite improved call center responsiveness. - Lekgetho Live Tax Information System (TAX IS) introduced in 2020 faced flawed data migration, usability concerns, and varied staff acceptance. - Integration of customs and domestic tax functions led to inefficiencies, unclear accountability, and chronic understaffing in domestic tax divisions. - February 2022 post-TADAT mission recommendations: - Develop a systematic compliance risk management framework and modernize audit selection practices. - Establish a dedicated Taxpayer Services Department and expand outreach initiatives to encourage voluntary compliance. - Undertake an external review of the TAX IS platform to resolve usability and data migration challenges. - Realign BURS organizational structure to provide clearer separation of functions between customs and domestic tax divisions. ### ICT, taxpayer services, and revenue mobilization recommendations - TAX IS (introduced in 2020): expected to modernize tax administration but hampered by flawed data migration, inconsistent usability, and varied staff acceptance. - Recommendation: conduct an external review of the TAX IS system and implement necessary improvements. - Taxpayer service and outreach: fragmented across multiple departments; improved call center responsiveness noted but broader engagement and customer service initiatives need expansion. - Recommendation: create a unified Taxpayer Services Department to develop a coherent strategy for outreach and voluntary compliance. - Data analytics: greater use of data analytics recommended to strengthen risk assessment and operational efficiency. ### Roadmap for reform and strategic priorities - BURS mid-term review of 2019-2024 strategic plan identified priorities: enhancing compliance enforcement, optimizing organizational efficiency, and leveraging digital transformation. - IMF 2022 mission found reform progress slow due to leadership changes and inadequate execution mechanisms. - Proposed Transformation Roadmap: focus on short-term actions to improve revenue collection and tax administration effectiveness. - Strategic reform agenda centers on three actions: - Develop a clear compliance improvement plan with measurable outcomes. - Enhance use of risk-based tax administration to improve audit effectiveness and enforcement outcomes. - Accelerate reforms to modernize BURS’s operational framework and align revenue administration with international good practices. ### Public Investment Management Assessment (PIMA) — scope and 2023 update - PIMA framework evaluates institutional design and effectiveness of public investment management across three key stages: (i) planning of investment levels, (ii) allocating investments to sectors and projects, (iii) delivering productive and durable public assets. - 2023 PIMA update for Botswana was conducted in September 2022 and evaluates PIM institutional strengths and weaknesses and provides practical recommendations. ### Trends in public investment and capital stock metrics - Public investment trends: - From 1990 to 2012, public investment averaged 35 percent of total investment. - Declined to 25 percent in the past decade. - Public investment peaked at 17 percent of GDP in 2009. - Public capital stock: - Reached 106 percent of GDP in 2019. - Per capita public capital stock was 50 percent above the EME average and ten times that of SSA (IMF estimates). - National plans: - Under National Development Plan 11 (NDP11), investments focused on roads, power, and water and sanitation; implementation was disrupted by COVID-19. - Draft Transitional National Development Plan (TNDP, covering 2023–2025) envisions renewed expansion in public investment, particularly in water and transport infrastructure. ### Key PIMA findings since 2017 - Progress since 2017: improvements in institutional structures, legal frameworks, and strategic orientation for managing public investments, but implementation remains weak. - Institutional strengths and gaps: - MFED plays a central role in public investment planning and budgeting; sector ministries and agencies execute projects. - Lack of coordination across entities leads to fragmented project execution. - Disconnect between national planning (NDP) and budget allocation due to competing national priorities and slow economic recovery. - Slow execution pace for key public investment projects driven by inadequate project management, lack of skilled personnel, and poor ministry/agency coordination. - Project selection and appraisal challenges: - Project selection criteria often unclear; decision-making lacks transparency. - Tendency to select projects based on political considerations rather than long-term developmental impact or alignment with national priorities. - Appraisal process is often ad hoc with limited use of cost-benefit analysis and investment evaluation tools. - National and sectoral planning processes not always aligned with budgeting; projects sometimes initiated without adequate feasibility studies or risk assessments. - Project implementation and monitoring deficiencies: - Development Project Monitoring System (DPMS) exists but is used inconsistently; detailed, timely reporting on project outcomes is lacking. - Monitoring data are often underutilized for decision-making or project adjustments. - Under-resourced project management capacity at central and sectoral levels contributes to frequent delays and cost overruns. - Common outcomes: delays in construction, maintenance backlogs, incomplete projects. - Asset management and sustainability shortfalls: - Insufficient focus on maintenance and sustainability once projects are completed. - Many infrastructure projects face significant maintenance challenges, reducing effectiveness over time. - Lack of a comprehensive asset management plan and clear strategy for managing public assets. - Inadequate resources allocated for maintenance leading to premature deterioration of infrastructure. ### Recommendations for reform (PIMA-related and cross-cutting) - Improve coordination between national planning and budgeting to ensure alignment of sectoral plans with national development strategy. - Strengthen project selection and appraisal by formalizing appraisal systems, increasing use of cost-benefit analysis, and ensuring feasibility and risk assessments prior to project initiation. - Enhance project implementation and monitoring: - Improve utilization of DPMS and other monitoring tools for timely reporting and adaptive project management. - Build project management capacity and technical skills at central and sectoral levels. - Develop and implement a comprehensive asset management strategy to ensure maintenance and sustainability of public investments. - Address procurement and PFM weaknesses noted elsewhere to reduce delays, cost overruns, and improve value for money in public investment projects. *Source: IMF staff report content summarized from the provided chapter.* ### 23. The 2023 PIMA update provides a comprehensive set of recommendations to address the ### 23. The 2023 PIMA update provides a comprehensive set of recommendations to address the ### Key recommendations from the 2023 PIMA update - Improve project selection, enhance implementation and monitoring of public investments, and ensure long-term sustainability of infrastructure. - Target reforms across legal and institutional frameworks, project appraisal and selection, monitoring and evaluation (M&E), capacity building, and asset management to maximize developmental impact. ### Strengthening legal and institutional frameworks (paras. 24) - Refine the Public Finance Management Act (PFMA). - Ensure sectoral ministries have clear guidelines for planning, selection, and implementation of public investment projects. - Clearly define roles of various actors in the public investment process to improve coordination across ministries and agencies. - Improve alignment of national planning and budgeting processes by integrating national and sectoral plans more effectively with the budget process. - Enhance the capacity of the Ministry of Finance and Economic Development to oversee and coordinate the entire public investment cycle. ### Enhancing project selection and appraisal (para. 25) - Focus on transparent, evidence-based project selection where a gap to the efficiency frontier stands out (Figure 4). - Formalize project selection criteria. - Introduce robust cost-benefit analyses to help prioritize projects based on alignment with national development goals. - Ensure sector ministries have technical capacity to conduct rigorous appraisals to improve value-for-money outcomes and reduce politically or short-term driven selections. ### Improving monitoring and evaluation systems (para. 26) - Increase use of the Development Project Monitoring System (DPMS) and ensure monitoring data inform decision-making. - Enhance training of personnel responsible for monitoring and improve reporting processes for timely and accurate data collection. - Strengthen ex-post evaluation to assess effectiveness of completed projects and extract lessons learned. - Foster a culture of accountability and transparency in public investment management to ensure effective utilization of investments. ### Building capacity in public investment management (para. 27) - Develop a comprehensive capacity-building strategy for civil servants involved in project planning, implementation, and monitoring. - Provide specialized training in project management, public procurement, and asset management. - Explore partnerships with international organizations, such as the World Bank, for technical assistance to strengthen public investment management systems. ### Asset management and sustainability (para. 28) - Develop a comprehensive asset management strategy focused on maintenance and sustainability of infrastructure. - Allocate sufficient resources for maintenance and repair. - Conduct regular assessments of infrastructure conditions and develop long-term maintenance plans. ### Overall assessment of PIMA findings (para. 29) - Progress noted in strengthening institutional frameworks and improving project planning. - Significant gaps remain in project selection, implementation, and monitoring. - Recommended multi-faceted approach: legal reforms, better project selection criteria, and building institutional capacity. - Success depends on government commitment to transparency, accountability, and efficiency to maximize infrastructure investment impact. ### Improving the financial reporting framework — background and objectives (paras. 30–31) - Objective: improve comprehensiveness, frequency and quality of fiscal reports; strengthen fiscal oversight; align PFM information systems including the chart of accounts with international good practices. - Review covered Government Accounting and Budgeting System (GABS), digitalization advice, proposed CoA changes, and re-establishing financial reporting. - GABS has faced persistent operational problems since its 2018 upgrade, culminating in a critical breakdown in August 2023 when the General Ledger stopped updating. - System instability due to excessive customization, poor configuration, and recurring hardware and database failures. - Consequences: suspension of in-year and annual financial reporting for the last two fiscal years, disrupted payment processing, delayed supplier settlements and bank reconciliations. - Heavy reliance on vendors and consultants; governance weaknesses including absence of a service-level agreement between the Accountant General’s Office and the Department of Shared Digital Services. ### Key observations on financial reporting (paras. 32–34) - Fragmented financial reporting: Ministry of Finance produces annual cash-based statements, while EBFs, SOEs, and local governments maintain independent accounting systems with limited integration. - Inadequate Chart of Accounts (CoA): does not support economic classification, policy analysis, or inter-entity transactions; lacks standardization across ministries and departments. - Limited use of accrual concepts: reports emphasize cash flows and insufficiently incorporate accrual-based data (accounts payable, receivable, depreciation). Initial accrual steps exist (some SOEs adopting IPSAS principles) but no whole-of-government strategy. ### Recommendations for reform of financial reporting (paras. 35–38) - Urgent priority: restore reliable financial reporting for the Budgetary Central Government using available data from GABS, revenue agencies, and the Bank of Botswana. - Medium- to long-term: sustainable improvements and any move toward accrual accounting depend on a well-functioning, stable IFMIS. - Redesign CoA to align with GFS 2014 and IPSAS; codify financial relationships between parent ministries and dependent entities (SOEs, EBFs). - Introduce unique identifiers for government-to-government transactions to improve tracking and eliminate discrepancies. - Establish a new Financial Reporting Framework (FRF) to standardize reporting across all government entities: clarify roles and obligations, establish a uniform reporting calendar, and require systematic reconciliation between cash-based and accrual-based systems. - Issue a comprehensive Financial Reporting Manual (FRM) as operational guidance and update the Public Finance Management Act to make compliance mandatory. - Institutional strengthening and sustained capacity building: create a committee to oversee implementation and monitoring; reinforce internal audit and accounting units; enhance collaboration between the Accountant General’s Department and the Office of the Auditor General; provide training and upskilling in modern accounting practices. ### Implementation strategy and phased roadmap (paras. 39) - Short-Term Priorities: - Restore financial reporting (IFMIS) and finalize the CoA redesign. - Develop reporting templates based on IPSAS cash and accrual standards. - Initiate a gap analysis of existing IT systems and accounting processes. - Medium-Term Priorities: - Roll out the revised CoA across all budgetary and non-budgetary entities. - Adopt and pilot the Financial Reporting Manual (FRM) in key ministries. - Begin transition from cash-based to hybrid accrual reporting for selected areas (e.g., payroll, vendor payments). - Long-Term Goals: - Full adoption of accrual-based IPSAS reporting at the general government level. - Integration of SOE and EBF financial data into consolidated reports. - Regular publication of whole-of-government financial statements. ### Broader fiscal governance considerations (paras. 40–41) - Stronger reporting enhances fiscal transparency and investor confidence, enables better tracking of public debt and assets, and supports risk-based fiscal planning. - Consistent classification and monitoring of transfers to SOEs and dependent entities is critical for managing contingent liabilities and safeguarding fiscal sustainability. - Reform success requires sustained political support, inter-agency coordination, and investment in people and systems. - Phased, realistic approach recommended to balance ambition with capacity and institutional readiness. ### Ministry of Finance organizational assessment — scope and context (paras. 42–43) - Review assessed organizational strengths, gaps, and coordination issues across core PFM functions: macro-fiscal forecasting and policy, fiscal risk analysis, budget preparation, financial control and reporting, and reform coordination. - Triggered by deteriorating fiscal buffers and increasing macro-fiscal risks. - Findings: MoF lacks a unified structure for macro-fiscal policy management; PRDMU performs select forecasting and strategy functions but is not charged with below-the-line fiscal projections, comprehensive MTFF production, regular fiscal performance reporting, and macroeconomic policy analysis. - Institutional structure for fiscal risk management is underdeveloped. - Recommendation: establish a Macro-Fiscal Management Department integrating macro-fiscal policy, tax policy, debt sustainability analysis, and fiscal risk analysis; reconstitute the technical macro working group including relevant agencies; review and expand mandates of Tax Policy and Debt Management Departments. ### Budget preparation findings and recommendations (paras. 44–45) - Budget coordination in MoF is fragmented; responsibility split across divisions; recurrent and development budgets prepared separately, weakening budget unity. - Recommend establishing a dedicated budget coordination unit to streamline preparation, facilitate cross-department collaboration, and ensure adherence to the budget calendar. - Clarify MoF and National Planning Commission roles on PIM and set responsibilities in the budget calendar. - Budget challenge function undercut by limited capacity: only five desk officers manage challenge responsibilities for all MDAs. - Recommendation: augment desk officer capacity, training, and analytical capabilities to restore MoF's gatekeeping function. ### Financial control, accounting and reporting findings and recommendations (paras. 46–47) - Structural and operational weaknesses: outdated PFM legal framework, no consolidated financial statements since FY2021/22, incomplete or unreconciled in-year reports. - GABS technologically obsolete and poorly maintained; core manuals (accounting policies, SCOA guides) missing; weak internal controls causing financial losses. - Recommendations: - Strengthen the Accountant General’s Department (AGD) responsibilities for design and oversight of financial control, accounting and reporting framework. - Transfer procurement policy coordination to the procurement authority. - Strengthen the accounting systems management function to better manage and develop GABS and external application providers; expand AGD systems group. - Upgrade cash management and financial reporting capacities. - Procure a new IFMIS or reinstall GABS; implement an interim reporting solution urgently. - Increase Accounting Officers’ engagement with internal audit findings and decentralize financial control responsibilities. ### Cross-cutting functions and reform implementation (para. 48) - PFM reform implementation has been piecemeal and lacks strategic coherence; responsibilities are not clearly assigned; reform monitoring is weak; coordination unit underpowered. - Recommendations: - Place the reform coordination office under the Permanent Secretary and hold departmental heads accountable for outputs. - Integrate finance and accounting functions across MDAs. - Consolidate development partner coordination into a single unit to harmonize external engagement. ### Implementation roadmap and priority recommendations (paras. 49; table) - Report proposes 16 priority recommendations across macro-fiscal, budget management, financial control, and cross-cutting themes with short-, medium-, and long-term timelines. - Selected prioritized recommendations (preserving exact wording and timeframe/priority labels): - MACRO-FISCAL 1. Establish a stand-alone Macro-Fiscal Management Department, drawing on the existing capabilities of the Transformation Office, and expand role to cover all major macro-fiscal roles. — Short-term — High 2. Expand the mandate and build-up the capacity of Tax Policy and Debt Management Divisions. — Medium-term — Medium 3. Staff, train and direct PEEPA to carry out fully the SOE governance and oversight functions — Medium-term — High 4. Reconstitute the Technical Macro-Fiscal Working Group — Medium-term — Medium - BUDGET PREPARATION AND MANAGEMENT 5. Combine the existing budget coordination functions to guide budget preparation including development of the budget calendar and guidelines, and lead the rollout of budget reforms — Medium-term — High 6. Strengthen coordination of the recurrent and development budget, including the functions and responsibilities of the MoF and NPC — Short-term — High 7. Review institutional arrangements for budget decision making with a view to incorporate the early participation of key role players — Medium-term — High - FINANCIAL CONTROL, ACCOUNTING AND REPORTING 8. Strengthen the OAGs design and oversight of financial control, accounting and reporting framework — Short-term — High 9. Transfer OAG procurement policy coordination responsibilities to PPRA — Short-term — Medium 10. Strengthen the OAG’s systems function to manage and develop GABS and to manage external application providers — Short-term — High 11. Expand mandate of the Cash Management Unit for monitoring cash flows and guiding budget releases — Short-term — High 12. Strengthen arrangements and secure greater engagement of Accounting Officers with the internal audit findings — medium-term — Medium - CROSS-CUTTING 13. Review the arrangements for progress reporting and monitoring of the PFM reform strategy, relocate the coordination function to the Office of the PS — Medium-term — Medium 14. Review the current PFM reform strategy and elaborate aspirational but credible expectations, priorities, plans, etc. for the achievement of proposed reform outputs — Medium-term — Medium 15. Implement arrangements to provide for a more integrated finance function in Ministries, Departments, & Agencies (MDAs) — Longer-term — Medium 16. Review opportunities to consolidate development partner coordination within MoF — Medium-term — Medium ### Strategic conclusion (paras. 50–51) - MoF must modernize its PFM framework to respond to deteriorating fiscal conditions and rising macroeconomic risks. - Institutional reform, analytical capacity, and strategic leadership are vital to enhance fiscal governance and sustain long-term economic stability. - IMF technical assistance recommends: modernizing tax administration, strengthening budget preparation and execution, improving public investment management, and enhancing financial reporting and transparency. - Implementation depends on strong political commitment, effective sequencing of reforms, and investment in institutional capacity to restore fiscal sustainability, rebuild buffers, and support Botswana’s long-term development goals. *Source: Excerpt of the IMF technical assistance and assessment sections as presented in the provided content unit.* --- _Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025161.pdf_