Gaborone — Botswana's economy is expected to slow down to 3.8 per cent in 2023, compared to 5.8 per cent in 2022, consequent to the weak demand for rough diamonds.
This therefore, calls for more prudent resource mobilisation and harnessing, so that every thebe available takes the nation an extra mile, President Dr Mokgweetsi Masisi said during the delivery of State-Of-The Nation Address in Gaborone yesterday.
He said the growth in 2023 was expected to be driven by the non-mining sector, underpinned by various factors such as government interventions aimed at accelerating economic transformation and building economic resilience.
"The annual average growth rate falls short of the six per cent required to attain a high-income status as espoused by the National Vision 2036. It is for this reason that we are intensifying our efforts to transform the economy, and sustainable economic development remains central to government's development agenda," said Dr Masisi.
On the cost of living, he said the average inflation recorded in 2022 was 12.2 per cent, and that was largely driven by external factors such as the increase in international oil prices and supply chain disruptions experienced during the first half of the year.
In response, Bank of Botswana raised the Monetary Policy Rate and has maintained it at 2.65 per cent since August 2022, Dr Masisi said.
The President said inflation had since tapered, reaching 3.2 per cent by September 2023, and was expected to modestly remain within the price stability range of three to six per cent in the short to medium term.
Speaking on Private Sector Export-Led Growth, Dr Masisi said government was resolute on building a resilient export-led, innovative and knowledge-based economy with access to a skilled and internationally competitive workforce, leading-edge technology and infrastructure.
He said the growth of a diversified export-led economy remained key to building a prosperous society through the creation of value chain opportunities across all sectors, for employment and improved competitiveness.
In addition, Dr Masisi said expansion of value chains was expected to contribute to the foreign exchange earnings and government budget, in the process enable government to provide public goods and services, including infrastructure development, health, education, water and sanitation.
The President said the Provisional Balance of Payment figures estimated a surplus of P4.5 billion in 2022, compared to a deficit of P2.9 billion in 2021, adding that government welcomed the significant growth of P7.4 billion, which had led to the increase in foreign reserves needed for payment of goods and services across borders.
Dr Masisi said the surplus was, in part, due to favourable trade performance owing to a substantial increase in export earnings.
The total export commodities were largely from the mineral sector, particularly diamonds, copper-nickel and silver, all of which accounted for 92 per cent of total exports contribution, Dr Masisi said.
That notwithstanding, the President said the import bill remained high and presented an opportunity to grow local industries.
He reiterated that Foreign Direct Investment (FDI) inflows were approximately P3.2 billion during the current financial year, while Domestic Investment and Expansions stood at approximately P444 million.
The President said mining and services sectors contributed the most to domestic investment, as well as to FDI with the total number of jobs created through the FDI, Domestic Investment and Expansions standing at 4 229 during the 2022/23 financial year.
"The development of capital markets remains a priority as evidenced by the recent promulgation of the new Retirement Funds law, among others.
The law requires Pension Funds to invest at least 50 per cent of their portfolios locally," President Masisi said and added that such would not only deepen the domestic capital market, but would grow the financial sector as well.
Notably, Dr Masisi said government launched the 2023/24 Borrowing Strategy and Auction Calendar in June to raise public awareness and enhance transparency on public debt management.
He said the launch of the strategy was part of an endeavour to develop the local currency bond market, adding that it was a reform that was aimed at building investor-relations, which was important for the development of capital markets.
As part of the continuing efforts to improve the transmission and effectiveness of monetary policy operations, commercial banks were, with effect from April, allowed to individually and independently determine their own Prime Lending Rates.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
It is envisaged that this will engender competitive loan pricing in the market, and reduce the cost of borrowing for the benefit of consumers, Dr Masisi said.
He said the move was part of the on-going monetary reforms designed to enhance the effectiveness of tools and instruments for the management of banking liquidity and efficiency of interbank markets.
To the latter, he said the Banking Act was amended in 2023 to, among others, grant Bank of Botswana powers to implement a risk-based supervision framework and in the process safeguard deposits for Batswana in the event of any potential bank distress.
The amendment also introduced tiered banking, which gave Batswana an opportunity to play a role in the banking sector and apply for banking licences.
Dr Masisi said these reforms would go a long way in building confidence and trust in the banking system.
BOPA
