IMF suggests public sector reform to enhance growth in Botswana

Gaborone, Botswana (PANA) – International Monetary Fund (IMF) Directors have underscored the importance of adjusting Botswana’s development model to boost growth potential, lower unemployment, and promote diversification in the southern Africa country.

Concluding the Article IV consultation with Botswana, the IMF Executive Board also welcomed the national authorities’ commitment to accelerate the implementation of key structural reforms.

They underlined the need to reform the public sector and its role in the economy, especially by restructuring and privatizing parastatals, undertaking a civil service reform, and strengthening the prioritization of public investment projects.

In their assessment, the Directors noted that sizable buffers and prudent policies have kept the economy stable despite diamond market weakness and volatility, but progress with structural reforms has been mixed.

They pointed out that the diamond cum public sector-led development model has been showing its limitations with sluggish growth and weak job creation. In recent months, Botswana authorities approved key legislation to improve the business environment and announced plans to proceed with privatizations, rationalize parastatals, and relax restrictions on visas and work permits.

In order to maintain strong buffers, Botswana needs gradual and growth-friendly consolidation over the medium term, the Directors said in a statement made available to PANA on Thursday.

“Directors agreed that continued commitment to prudent policies and timely and focused implementation of structural reforms will be crucial to promote private sector growth, reduce unemployment, and diversify the economy,” said the statement.

“Directors stressed the need to remove distortions, (especially monopolies and regulations that raise the cost of doing business), better target social spending, improve education policies, liberalize the granting of visas and work permits, and realign educational and vocational polices to address skill mismatches.

“They also encouraged continued efforts to deepen financial markets and foster financial inclusion, especially by strengthening creditor rights and information on borrowers’ creditworthiness, increasing the volume and frequency of issuance of government bonds, and enhancing the breadth and depth of mobile money payments.”

In 2017, despite higher diamond production, Botswana’s real GDP growth dropped to 2.4 percent primarily because of the closure of a major copper and nickel mining company.

Non-mineral growth decelerated reflecting the indirect effects of the company’s closure on electricity and transportation, coupled with a small slowdown in trade and construction. Inflation remained near the lower end of the Bank of Botswana’s objective range of 3–6 percent, with the 12-month rate at 3.1 percent in July 2018.

In 2018–19, according to the IMF, it is expected that improving conditions in the diamond market and fiscal stimulus will temporarily boost economic activity. “The medium-term economic outlook will depend heavily on the successful implementation of critical structural reforms,” the Fund said.
-0- PANA AR/MA 6Sept2018

06 september 2018 07:32:10




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