## Botswana: Staff Report for the 2014 Article IV Consultation

_IMF Staff Country Reports, July 15, 2014_

## Source details

**Canonical URL:** [Botswana: Staff Report for the 2014 Article IV Consultation](https://www.imf.org/en/publications/cr/issues/2016/12/31/botswana-staff-report-for-the-2014-article-iv-consultation-41749)

## Other formats

- [Markdown version](/en/publications/cr/issues/2016/12/31/botswana-staff-report-for-the-2014-article-iv-consultation-41749/index.md)
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## Bibliographic details
- Published: July 15, 2014
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498337922.002

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### Setting and key issues
- Botswana benefited from "good governance and prudent macroeconomic and natural resources management" that produced an "impressive increase in the GDP per capita during the last three decades."
- Recent slowdown: trend growth has softened in recent years, reflecting "the decline in the contribution of total factor productivity (TFP) to growth."
- Policy implication: the TFP slowdown "calls for policies to reduce structural bottlenecks in the economy."
- Context: Botswana is characterized alongside other "small middle-income countries (SMICs) in the region."

### Current conditions and outlook
- Macro balances: "Botswana’s economy remains broadly internally and externally balanced."
- Policy stance: "the authorities’ near-term macroeconomic policy mix is appropriate."
- Growth projection: "Output growth is expected to slowdown in 2014 reflecting partly weaknesses in the non-mineral sector."
- Inflation outlook: inflation is expected to remain within the Bank of Botswana’s (BoB) medium-term objective range of "3-6 percent."

### Fiscal policy assessment and recommendations
- Staff position: "Staff supports the FY2014/15 budget, which reins in unproductive current spending, while protecting growth-promoting capital spending."
- Medium-term consolidation: achieving the budget's medium-term fiscal consolidation objectives "would require articulating concrete measures to reduce the wage bill relative to GDP and broaden the revenue base."
- Wage bill: progress "remains modest" toward reducing the wage bill relative to GDP.

### Financial sector development and risks
- System health: "Botswana’s banking system is well-capitalized and profitable with relatively low nonperforming loans."
- Household credit risk: "Although from a low base, credit growth to households continues to expand at a high rate, which poses potential vulnerabilities for the financial sector."
- Policy recommendation: "staff recommends that macro prudential measures be considered to temper the rate of growth of household borrowing."
- Development goals: staff "welcomes the government’s emphasis on enhancing greater financial deepening and inclusion, while preserving the stability of the financial system."

### Reinvigorating growth — structural reforms
- Core challenge: to return to strong growth and accelerate convergence to higher income levels, Botswana needs policies to "reinvigorate TFP growth."
- Priority measures:
  - "Improving the quality of public spending, notably in public investment projects and education" to transform diamond wealth into sustainable assets.
  - Continue efforts to "improve the country’s competitiveness, including through reducing the regulatory burden on firms."

### Past advice and authorities' response
- Broad agreement: there is "broad agreement between the Fund and the authorities on the macroeconomic policy stance and structural reform policy priorities."
- State-owned enterprises (SOEs): consistent with staff advice, the FY2014/15 budget "outlined a framework to reduce the burden of loss-making state-owned enterprises on fiscal resources and propel them toward commercial viability."
- Medium-term projections: the budget "includes medium-term projections of government accounts, as recommended by staff during past consultations."

*Source: Botswana: Staff Report for the 2014 Article IV Consultation, July 15, 2014.*

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## Content in this bundle

- **1. Botswana: Long-Term Economic Developments**
  - [1. Botswana: Long-Term Economic Developments (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2014/_cr14204.pdf.md){rel="alternate" type="text/markdown"}
  - [1. Botswana: Long-Term Economic Developments (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2014/_cr14204.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2016/12/31/botswana-staff-report-for-the-2014-article-iv-consultation-41749_