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Statement at the Conclusion of an IMF Mission to
Botswana
Press Release No. 12/201
June 1, 2012

A mission from the International Monetary Fund (IMF) visited Gaborone
during May 21-June 1 to conduct the 2012 Article IV Consultation
discussions with Botswana. The mission's work focused on reviewing recent
economic developments, prospects and risks, and policies to ensure
continued macroeconomic stability and growth. The mission met with
Minister of Finance and Development Planning, the Honorable Kenneth
Matambo; Bank of Botswana Governor, Ms. Linah K. Mohohlo, Mr. Solomon M.
Sekwakwa, Permanent Secretary at the Ministry of Finance and Development
Planning; senior government officials, development partners, and
representatives from the private sector and civil society.

At the end of the mission, Mr. Lamin Leigh, IMF Mission Chief for
Botswana, issued the following statement in Gaborone today:

“The mission forecast that overall real GDP growth would be about 4
percent in 2012 compared to 5 percent in 2011. The international diamond
market showed some signs of recovery in the first quarter of 2012,
following a relatively poor performance towards the end of 2011.
Non-mining GDP growth is likely to moderate on the back of the imminent
completion of large construction projects. Going forward, the current
fragile external environment poses considerable uncertainty on the global
economic outlook and mineral export demand. Thus, the period ahead will
require a delicate balancing act on the implementation of macroeconomic
policies.

“While inflation is currently higher than the Bank of Botswana’s
medium-term objective range of 3 -6 percent, it has trended downward in
recent months, and at this stage, there appears to be no firm evidence of
generalized price pressures in the domestic economy. Thus, the mission
supports the Bank of Botswana’s current accommodative monetary policy
stance.

“The mission commends the Government of Botswana’s on the FY2012/13
Budget which targets a small fiscal surplus. The budget is centered on
further expenditure restraint, while improving the quality of spending to
ensure value for money. Specifically, the mission continues to support the
emphasis on expenditure control as the government’s spending envelope
(above 30 percent of GDP), is high by international standards, thus
warranting a thorough assessment of pockets of unproductive spending and
ways to increase efficiencies. The mission also recommends the rebalancing
of revenue-raising and expenditure-cutting measures. This could be
achieved by complementing the measures in the Budget with policies that
widen the domestic tax base and prepare the economy for an eventual
decline in diamond revenues. Measures in this regard include a judicious
rationalization of tax exemptions and improvements in tax administration
to broaden the revenue base.

“The mission welcomes the emphasis given by the government to broaden
access to financial services and improve financial intermediation. While
Botswana’s financial system has grown and diversified considerably over
the last decade, the level of financial intermediation is relatively low
compared with other high middle-income countries although it has improved
in more recent years. Thus, greater financial development and inclusion
are consistent with current government policies as described in both the
Vision 2016 and National Development Plan (NDP) 10. The mission also
welcomes the emphasis placed in the FY2012/13 budget speech on enhancing
the capacity of Non-Bank Financial Institutions Regulatory Authority
(NBFIRA).

“The government’s emphasis on poverty eradication, inclusive growth,
tackling the high level of unemployment and diversifying the economy is
well placed. Considerable strides have been made towards reducing absolute
poverty as reflected in the Botswana Core Welfare Indicators survey of
2009/10. Efforts to encourage greater financial inclusion and measures to
target inequality at its sources should together help enhance inclusive
growth. Tackling the high level of unemployment in Botswana will require
faster economic growth and addressing distortions in the labor market
including the skill mismatch. The government’s tertiary education reform
program and the establishment of the Human Resource Development Council,
combined with the graduates’ internship program would contribute to
addressing the skill mismatch in the labor market. The mission urges the
government to move ahead with a number of regulatory reforms to improve
the business climate to support the goals of the recently approved
Economic Diversification Drive (EDD).

“The mission would like to thank the authorities for their warm
hospitality, the timely provision of required information, the productive
and open discussions, and the excellent cooperation during the
mission.”

IMF EXTERNAL RELATIONS DEPARTMENT

Public Affairs

Media Relations

E-mail:

[email-masked]

Phone:

202-623-7100

Fax:

202-623-6278

Fax:

202-623-6772

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