JOHANNESBURG (miningweekly.com) – After a seemingly rapid recovery from the 2008/9 global economic downturn, Botswana’s gross domestic product (GDP) growth is estimated to have turned slightly for the worse in 2015, owing to a decline in the global demand for diamonds and copper – two of the country’s main export commodities.

This was according to a report released this week by the International Monetary Fund (IMF).

Non-mining activities, which recording positive growth over the year, nevertheless remained subdued owing to spillovers from a reduction in mining activity, regional drought, as well as electricity and water shortages.

The report stipulated that inflation, meanwhile, had been declining over the past few years and was now close to the lower bound of the Bank of Botswana’s (BoB) objective range of between 3% and 6%, reflecting a successful monetary policy, lower fuel prices and an appreciation of the pula against the rand.
 
However, after three years of surplus, the government balance turned into a deficit, reflecting lower mining revenues, a decline in revenues from the South African Customs Union (Sacu), and higher fiscal spending, part of which was related to the government stimulus programme.

The deficit had been financed by drawing on previously accumulated savings and incurring a small amount of domestic debt. The IMF report noted that the external current account surplus was also on the decline, but was estimated to be in positive territory.

Further, because Botswana entered the current downturn with large fiscal and foreign reserve buffers, the country was well positioned to deal with the decline in export demand.
 
The IMF projected a gradual economic recovery for Botswana over the next three years, based on an expected gradual increase in diamond prices and fiscal stimulus. Inflation was expected to remain within the BoB’s objective range.

Botswana’s 2016/17 budget submitted to Parliament in February envisaged a fiscal deficit of about 4% of GDP, owing to lower mining and Sacu revenues and higher capital expenditures.

In the medium-term, the country’s macroeconomic framework envisaged fiscal consolidation based on a gradual recovery of the mining sector and expenditure rationalisation.

The external current account surplus was projected to narrow further this year, but the IMF expected this to gradually reverse to trend owing to an expected recovery in export prices.