Mmegi/The Reporter (Gaborone)
Brian Benza
10 July 2009
Acceleration of the diversification of the economy will be the strategic thrust of development policy in the National Development Plan (NDP) 10. This is because the global economic crisis has created the need to broaden revenue streams, government has said.
Presenting the draft NDP 10 in Parliament on Monday, acting Minister of Finance and Development Planning, Keletso Rakhudu said that although diversification has been part of the economic policy for many years, the anticipated reduction in government revenues from diamonds in the long term has seen government placing greater emphasis on the programme.
"Further diversification requires accelerated efforts to reduce constraints on private growth," he said. Unlike the previous National Development Plans, which spanned over six years NDP 10 will be implemented over seven years to coincide with the Vision 2016. Already, NDP 10 has been delayed by a year.
Rakhudu said that due to the financial constraints on government coffers, the development budget in NDP 10 has been capped by cabinet at P60 billion while the recurrent budget has a ceiling of P185.6 billion. The overall NDP 10 ceiling is P245.6 billion. The recurrent budget has been cut by seven percent while development budget has been slashed by five percent in the approved 2009-2010 budget, as a belt-tightening measure.
"This means that both ongoing and new projects should fall within this budget ceiling and that, entries for the 2009-2010 budget may specifically differ from the Ministry submissions during the budget session," Rakhudu said. After modelling the plan and factoring in the effects of the global economic crisis, government projects real GDP to grow at an average compound rate of 3.1 percent for the mining sector and 5.6 percent for the non-mining sector. Due to the anticipated fall in revenue, a P31.9 billion cumulative deficit is expected over the seven years of NDP 10.
Rakhudu said that in a pessimistic scenario, it is assumed that recovery of the diamond market and non-mineral GDP will be delayed by a year.
"This would reduce total government revenue by P14 billion. In order to avoid a larger budget deficit, total government expenditure would have to decrease in real terms by 2.5 percent annually and development expenditure by 14 percent, in each of the last six years of the plan," he said. In the 2009-2010 budget, government said that it was going to cut down on some development projects due to the fall in revenues.
Recently, acting Permanent Secretary in the Ministry of Finance, Dr Taufila Nyamadzabo said that the respective ministries have to decide for themselves which projects to shelve or to downsize but no major projects have been affected.
"No major projects have been affected as we are still going ahead with projects such as the Morupule B power station, North-South Water Carrier projects, expansion of the Sir Seretse Khama International Airport, Francistown Airport, Maun Airport and the BIUST, the expansion of UB and the on going ISPADD.
"We are also not going to abandon poverty alleviation projects and public works which are labour-intensive," he said. Analysts say that a fundamental review of government spending is needed on both capital projects and ongoing programmes and how decisions on spending are reached. Such a review should focus on effectiveness of spending in achieving objectives and securing value for money.
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