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Botswana 2019 elections to delay fiscal consolidation efforts

Publishing Date : 21 January, 2019

Author : TSAONE SEGAETSHO

Rating agency Moody's hawk-eyed prediction sees Botswana going at a snail’s pace in fiscal consolidation efforts and this could increase policy uncertainty ahead of the 2019 general elections. “Ahead of elections in Botswana, the authorities now envisage a more gradual pace of fiscal consolidation…” the rating agency said in an outlook this week.


Botswana is bracing for national elections in eight months. According to Moody’s, upcoming elections could increase policy uncertainty and delay fiscal consolidation efforts in countries like Botswana who are having elections this year. Elections will take place in a number of Sub Saharan Africa countries, including South Africa, Nigeria, Senegal, Botswana, Namibia, Cameroon and Mozambique in 2019.


 Moody’s is of the view that some of the factors that are constraint to credit quality is political ranging from domestic civil unrest, conflicts, succession risk, or simply from policy unpredictability  and their credit implications vary across the region. The rating agency also believes that political risk is an ever present credit constraint in Sub-Saharan Africa. However, Moody’s expects limited election-related policy uncertainty in Botswana, Namibia, Senegal and Ghana, “given their track records of political stability.”


“Overall, we expect the pace of fiscal adjustments to remain gradual at best as growth implications, political considerations and budget rigidities complicate consolidation efforts in some countries. (eSwatini, Namibia, Kenya), while in others, spending pressures ahead of elections may delay fiscal consolidation plans like in Botswana,” says Moody’s outlook. Moody’s also expects fiscal balances to improve or stabilize in most countries, with the median fiscal deficit of our rated Sub-Saharan Africa sovereigns narrowing to 3.1 percent of GDP in 2019 from an estimated 3.7 percent in 2018.


The rating agency also states that commodity exporters will achieve the largest deficit reduction in 2019 while some fiscal deterioration will occur across non-resource rich countries. Moody’s outlook for sovereign creditworthiness in 2019 in Sub-Saharan Africa remains negative overall, reflecting the rating agency expectations for the fundamental credit conditions that will drive sovereign credit over the next 12-18 months.


The negative outlook reflects still present credit challenges stemming from fiscal and external vulnerabilities amid tightening global liquidity conditions and intensifying global trade tensions, despite gradually improving growth prospects, according to Moody’s. Despite predicting that spending pressures ahead of elections may delay fiscal consolidation plans, Moody’s further stated that “we expect government debt ratios to deteriorate only marginally or stabilize in 2019, reflecting ongoing fiscal consolidation and the positive impact of higher growth rates on the denominator of debt-to-GDP.”


Moody’s Assistant Vice President Daniela Re Fraschini said: “Our negative outlook for sovereigns in Sub-Saharan Africa is driven by persistent credit challenges related to their ongoing fiscal and external vulnerabilities. That said, we expect credit pressures to ease relative to previous years, despite a more challenging external environment, as credit profiles display some resilience at their lower rating levels."


In this elections year, public servants expect government to increase their salaries and the sitting President Mokgweetsi Masisi soon after becoming a state head last year rode in that promise, experts and observers believe this will increase spending pressures ahead of this year’s general elections.  In his maiden State of the Nation Address Masisi hinted that he is going to increase public servants salaries.


"I wish to inform this August House that Government has appointed a consultant (PEMANDU Associates SDN.BHD of Malaysia) to, among others, review the current Public Service remuneration system in terms of salaries, allowances and benefits. The consultancy work is expected to be concluded before the end of December this year. Once the PEMANDU report has been finalized, Government will engage Public Sector Unions on the recommendations thereto,” said Masisi who is expected to heed the political pressure by increasing public servants salaries.


Last year Masisi also appointed a commission mandated to review salaries of senior government officials and politicians.  This commission is mandated to inquire into salaries, Conditions of Service and Other Entitlement of the President, Vice President, The Speaker of the National Assembly, Ministers, Deputy Speaker, Assistant Ministers, Leader of Opposition, Members of Parliament, Chief Justice, President of the Court of Appeal, Justices of Appeal, Judges of the High Court, Chairman of Ntlo ya Dikgosi, Members of Ntlo ya Dikgosi, Chairpersons of District Councils, Mayors, their Deputies, Chairpersons of Sub-Councils and their Deputies and Councillors. Masisi also said to the commission, "don't be intimated, feel free to recommend salary deductions if you feel so.”


“The Commission is expected to submit its recommendations in December this year (2018). It is the wish of Government for any recommendations agreed upon to be budgeted for and effected on 1st April, 2019,” said Masisi in his State of the Nation Address. Unemployment remains Masisi’s government’s biggest task towards this year’s elections and creation of jobs has been perpetually high on the incumbent president’s campaign card. Unemployment rate in Botswana is estimated to be around 19 percent.


Masisi’s administration has come with a National Employment Policy (NEP) which will come with implementable solutions to address the unemployment problem facing the country. “The goal of the NEP is to assist the country to achieve productive, gainful and decent employment for all, to contribute to the reduction of income inequality and as well as to support Government’s poverty eradication efforts.


To develop the NEP, Government obtained financial and technical support from the World Bank,” said Masisi in his first State of the Nation Address. Masisi added that the Draft National Employment Policy for Botswana is expected to be delivered by March, 2019, seven month before the general election in October 2019.

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