Press Release: Statement at the Conclusion of an IMF Mission to Botswana

IMF News, June 14, 2010

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Canonical URL: Press Release: Statement at the Conclusion of an IMF Mission to Botswana

An International Monetary Fund mission visited Gaborone during June 1-14, 2010 to conduct the Article IV Consultation with Botswana.
The mission met with:
- Minister of Finance and Development, the Honourable O. Kenneth Matambo;
- Bank of Botswana Governor, Linah K. Mohohlo;
- senior government officials, development partners, the private sector, and representatives of trade unions and civil society.
IMF Mission Chief to Botswana: Mr. Robert Burgess.

Findings:

"Botswana is recovering from its worst recession in more than 40 years."
"The economy contracted by 6 percent last year as demand for diamonds collapsed in the wake of the global financial crisis."
Fiscal and monetary policy response:
- "The prompt easing of fiscal and monetary policies helped to cushion the impact of difficulties in the mining sector on the rest of the economy."
Non-mining sector performance:
- "The non-mining sector grew by a healthy 6.1 percent in 2009."

Projections and risks noted by the mission:

Short-term rebalancing:
- "The economy will likely see some rebalancing this year as mining continues its gradual recovery while growth in the non-mining sector decelerates somewhat as fiscal stimulus is withdrawn."
Inflation dynamics:
- "Inflation may increase temporarily as increases in VAT, electricity tariffs, and other fees and charges feed through to prices, before falling within the Bank of Botswana's 3-6 percent objective during the course of 2011."
Revenue outlook:
- "The outlook for government revenues is set to become more constrained reflecting a trend decline in mineral revenues and customs and excise receipts."

Policy conclusions:

Shifting fiscal stance:
- "With recovery now underway, fiscal policy is being appropriately redirected away from short-term demand management towards medium-term considerations."
Budget stance and targets:
- "The budget for 2010/11 is a good start in this process of adjustment."
- "The government's intention to balance the budget by 2012/13 is ambitious but warranted in order to put the public finances back onto a sustainable footing."
Public finance management:
- "As the fiscal environment becomes more challenging, management of the public finances will need to improve."
- "With less revenues available than in the past, but social challenges remaining significant, the government will need to do more with less."
- Recommended reforms include:
- reforms to budget formulation and management;
- greater emphasis on prioritizing spending and delivering results;
- more efficient and effective budget management to support economic diversification and private sector development.

"Upon its return to Washington, the mission will prepare a final report, which could be considered by the IMF's Executive Board by late July."

Press Release No. 10/239 — Statement by IMF Mission Chief Mr. Robert Burgess; June 14, 2010.