24 Nov 2024

Due to the weak performance in the diamond trading and utilities sectors, the domestic economy registered a growth of 2.7 per cent in 2023, representing a slowdown from a growth of 5.5 per cent registered in 2022 as per data published by Statistics Botswana.

Responding to a parliamentary question, from Maun West MP, Mr Caterpillar Hikuama, the Vice President and also Minister of Finance, Mr Ndaba Gaolathe said much of the slowdown was specifically attributed to diamond sales suffered from subdued global demand.

On the basis of the ongoing challenges in the diamond industry, Mr Gaolathe said domestic performance weakened in the first half of 2024, having contracted by an average of 2.9 per cent, a stark contrast to the 4.3 per cent growth recorded during the same period in 2023.

“At the same time, diamond production exceeded targets, creating an oversupply and increasing inventories of rough diamonds, which carried over into 2024,” he said.

Due to persistent drought conditions, the finance minister said in the non-mining sector the agricultural sector underperformed, whilst other non-mining sectors performed positively, as a collective contributing 2.6 percentage points to GDP growth, partially offsetting the decline in the diamond sector in the first half of 2024.

Informing Parliament on the latest price developments, the minister said as of 2024, inflation had fallen faster than anticipated from the global energy price surge of 2022. Much of this, he said had been due to a faster declaration in fuel prices, which had exerted downward pressure on domestic inflation.

“In this regard, headline inflation stood at 1.6 per cent in October 2024 from 3.1 per cent in the same month of the previous year.

As a consequence, the Bank of Botswana has maintained an accommodative stance, having lowered the Monetary Policy Rate (MPR) in August 2024 to 1.9 per cent, from 2.15 per cent,” he said.

Mr Gaolathe further explained that the 2024 diamond market downturn had put pressure on the fiscal revenues, particularly mineral revenues, which is projected to significantly decline. For instance, he said a total of P3.84 billion in mineral revenue was collected during the first half of the financial year, compared to an estimate of P12.59 billion in the original budget, representing an under collection of P8.75 billion or 69.5 per cent.

To this end, the minister said preliminary data showed that as at the end of September 2024, total revenue grants stood at P34.67 billion, which was 13 per cent lower than the target of P46.8 billion for the first half of the year, with mineral revenue accounting for the underperformance.

Meanwhile, he said other revenue items performed in line with expectations, adding that Total Expenditure and Net Lending was consistent with government’s decision of August 2024 to reprioritise spending in response to the unfavourable revenue profile.

“In this regard, Total Expenditure and Net Lending was P38.87 billion, which 42 per cent of its adjusted for end of September 2024 was a deficit of P4.2 billion (-1.52 per cent of GDP),” he added.

As of end of August 2024, Mr Gaolathe said the Government Investment Account (GIA) had decreased, reaching P1.9 billion, compared to P15.6 billion in August 2023.

Much of the decline in the GIA, he said was due to lower cash inflows than outflows, amid constrained mineral receipts.

Additionally, as of August 2024, he said foreign exchange reserves stood at P57.8 billion, compared to P68.4 billion in the same month in 2023.

At this level, the amount of foreign exchange reserves represented around eight months of import cover of non-diamond goods and services compared to 10 months in August in 2023.

“It is therefore important to acknowledge that our revenues have been declining, which has negatively affected the buffers and government operations.

However, at a national economic level, the economy continues to operate reasonably, supported by a stable macroeconomic and financial environment,” explained the minister.

The minister therefore, assured Parliament that the country was not broke, adding that the stable macroeconomic environment was underpinned by sufficient levels of reserves, needed to settle external payments as well as stable prices.

Mr Hikuama had asked Mr Gaolathe to appraise Parliament on the performance of the economy and state of government finances, as well as to state if the country could be said to be broke or in a good, healthy economic state. Ends