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

_IMF News, May 31, 2011_

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**Canonical URL:** [Press Release: Statement at the Conclusion of an IMF Mission to Botswana](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr11206)

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## Bibliographic details
- Published: May 31, 2011

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### Mission visit and purpose
- An International Monetary Fund (IMF) mission led by Mr. Lamin Leigh visited Gaborone during May 18-31 to conduct the 2011 Article IV Consultation discussions with Botswana.
- The mission met with the Honorable O. Kenneth Matambo (Minister of Finance and Development Planning); Ms. Linah K. Mohohlo (Bank of Botswana Governor); Mr. Solomon M. Sekwakwa (Permanent Secretary of Ministry of Finance and Development Planning); senior government officials, development partners, and representatives from the private sector and civil society.
- The mission's work focused on reviewing recent economic developments and prospects and policies to ensure continued macroeconomic stability and growth.

### Economic outlook and growth drivers
- Finding: "Thanks in large part to good policies supported by a rebound in diamond exports, the Botswana economy is now back onto a strong growth trajectory."
- Finding: Despite rebound in growth, Botswana faces the challenge of sustaining revenue as diamond revenues are likely to plateau in the next few years.

### Inflation and monetary policy
- Finding: Inflation has edged up in recent months triggered by high international commodity prices.
- Finding: Inflation is currently higher than the Bank of Botswana’s medium-term objective band of 3-6 percent.
- Assessment: "At this stage, there appears to be no firm evidence of generalized price pressures in the domestic economy."
- Recommendation: The mission supports the Bank of Botswana’s neutral policy stance with respect to interest rates as outlined in the bank’s 2011 Monetary Policy Statement.

### Fiscal policy, public spending, and the Pula Fund
- Finding: The fiscal policy stance in the FY2011/12 budget should help to contain domestic demand and rebuild the Pula Fund.
- Finding: "The government’s overall expenditure envelope (as a share of GDP) is very high by international standards."
- Recommendations and policy priorities:
  - Conduct a thorough assessment of pockets of unproductive spending and ways to increase efficiencies.
  - Improve public financial management, including better prioritization of overall government spending.
  - Emphasize maintenance and refurbishment of existing infrastructure projects rather than initiating new projects.
  - Contain the growth of budget appropriations of current transfers, goods and services, and the wage bill.
  - Wage policy should be prudent; any nominal adjustment made in FY2011/12 would need to be financed by either over performance in revenues or expenditure savings so that the budget deficit remains unchanged.
  - Reduce the size of the wage bill as a share of GDP going forward, and make the public service leaner and more efficient.
  - Rebuild the Pula Fund for the benefit of future generations given the likely plateau of diamond revenues.
- Institutional reform: The mission welcomes efforts by the Botswana Unified Revenue Service to expand the tax base including through the establishment of a Large Taxpayer Unit (LTU) in line with international best practice.

### Structural challenges, diversification, and labor market
- Finding: Despite its upper middle-income status, Botswana faces significant development challenges.
- Recommendation: A broad-based and private sector led economy is essential to unleash and sustain growth, in line with the tenth national development plan (NDP10).
- Recommendation: Foster economic diversification beyond the diamonds sector by targeting economic sectors with high income and employment multiplier effects, while avoiding unwarranted tax exemptions that would narrow the tax base.
- Finding: Tackling the high level of structural unemployment is needed to improve the quality of economic growth.
- Policy support: The mission welcomes progress on the government’s tertiary education reform program and the Human Resource Development Council to help address the skills mismatch in the labor market.

### Concluding remarks
- The mission thanked the authorities for their hospitality, timely provision of required information, productive and open discussions, and excellent cooperation during the mission.

*Source: Press Release: Statement at the Conclusion of an IMF Mission to Botswana, May 31, 2011, IMF.*

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## References

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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr11206_