Gaborone: Madam Speaker, I have the honour this afternoon to present to the National Assembly budget proposals for the financial year 2011/2012. The preparation of the 2011/12 budget took a new approach with the process being guided by a Budget Strategy Paper prepared by my Ministry. This Paper was shared with stakeholders in October and November last year, including Members of Parliament, and formed the basis for discussion for the two Budget Pitso, that were the first of what we plan to be an annual consultation forum.
It is my hope that the Paper enabled stakeholders to understand the broader macro-fiscal context and Government Strategy for achieving cost-effective and sustainable spending; and that this will enhance transparency and accountability. I must add that my Ministry benefited from the interactions with stakeholders. Their suggestions and advice were taken into consideration during the preparation of the 2011/12 budget and the Budget Speech itself. Further, all documents relating to the budget will be posted on the Ministry website [www.finance.gov.bw also www.gov.bw], while stakeholders will also have the opportunity to share with us their views and suggestions by email at email@example.com. Going forward, we are developing a web-page dedicated to budget consultations, and we will hold radio talk shows and seminars to discuss budget issues with the nation.
I wish to further point out that the Budget Strategy Paper which I have just referred to is only one of the components of the new Public Finance Management Reform Programme being undertaken by the Government. The Public Finance Management Reform Programme is aimed at enhancing the management and efficiency of public spending and ultimately providing better services to the public. By providing an early opportunity for input from the general public and legislators, the programme is also meant to enhance transparency and ownership of the budgeting process. Another change that we have introduced in the Budget Speech is the exclusion of sectoral reviews. The sectoral reviews will be presented by respective Ministries at the Committee of Supply stage.
I am pleased to report that the economy and Government?s finances are following very closely the path that we laid out in last year?s budget. The recovery of the international economy in general, and the diamond market in particular, continue much as was anticipated, with complete recovery expected in 2012/13. The significant Government expenditure during the current financial year is helping to stabilise the economy in the face of incomplete recovery of international demand for our exports. The combined effect of economic recovery, reprioritisation, cost containment and the efficient use of resources will reduce the deficit substantially in the financial year 2011/12, and lead to attainment of a balanced budget by 2012/13. I should however emphasise that, even though the focus of this year?s Budget and subsequent ones is on fiscal management and balancing the budget, this will not be done at the expense of economic growth.
Hence, our budget must be more than simply balanced. We must ensure that we make the most of every Pula of public expenditure if we are to achieve our goals of rapid economic growth, poverty eradication, and economic diversification. Government accomplishes this by providing services that the rest of the economy needs, which could not normally be provided by the private sector. Some of these services are financed by the recurrent budget, while others require investments that are financed through the development budget. In each case, we must adopt a high growth strategy that emphasises spending that is both cost-effective and focused on national priorities.
The recommended allocation of our budget across Ministries is designed to reflect agreed national priorities. To the extent that current national priorities require a reallocation across Ministries, the shares of individual Ministries in the total budget have changed. Every Ministry must have a clear sense of what its priorities are, and how those relate to the national priorities. Each Ministry must reallocate resources out of low priority activities to high priority activities. The optimal use of resources may require a rebalancing between Recurrent and Development expenditures as part of the budget exercise. If, for example, the capital stock employed in delivering a particular priority service is deteriorating, resources must be diverted from some of the planned development expenditure to recurrent expenditure to finance repairs and maintenance.
The proposed expenditures under the development budget should be focused on high return projects. If a proposed project could not demonstrate a large net benefit to Botswana, it has to be either postponed or scaled down, to ensure that only those projects with clear high returns are implemented. Furthermore, over the project cycle, costs and benefits will be tracked, so that adjustments can be made in time to ensure that the project continues to justify its inclusion in the constrained budget, failing which it is either re-prioritised or scaled down.
Central to the high growth strategy is the parastatal sector. Most parastatal outputs are inputs for the rest of the economy. Where a parastatal is providing its services cost-effectively and achieves a high real return, the rest of the economy benefits. Where that is not happening, not only does the rest of the economy not garner the promised benefits, but because the parastatal is employing capital from the public purse, the economy is deprived of the capital that would be better invested elsewhere.
The strategy in this budget is designed to ensure that the public and parastatal sectors together do not crowd out the private sector, because rapid growth of the private sector is equally critical to the high growth strategy. Government and parastatals are seeking ways to reduce and ultimately stop the direct provision of particular goods and services that the private sector is able to offer. The Government and parastatal sector?s presence in the labour and capital markets often provides benchmarks for the private sector, but Government must be careful not to bid up the cost of labour and capital to the private sector. Equally important is the relationship between Government and the private sector. The growth of the private sector must not be based on subsidies from the public sector, because such a strategy is fundamentally unsustainable.
Government has always put emphasis on the need for economic growth and eradication of poverty. As the overall economy has grown over the decades, poverty in Botswana has dropped substantially. By focusing our expenditure on genuine high return Government initiatives we can anticipate a continuation of that reduction. But, we cannot be satisfied simply with an ongoing reduction of the number of people in poverty. We must strive to ensure that no Motswana is a victim of poverty. In brief, we must do what is necessary to achieve the goal of eradicating abject poverty. This requires a blend of initiatives ranging from opening additional opportunities for employment and income generation, to ensuring that the social safety net is adequate and targeted to those who cannot support themselves, while avoiding the creation of a dependency syndrome. This budget will consolidate and create new job opportunities, both in the short to medium term when projects are being implemented and as spin-offs are being realised from the implementation of such projects.
There is scope for increased foreign direct investment in Botswana given that the country continues to register favourable international ratings which must be translated into tangible benefits for the nation. Despite the challenges arising from the recent economic slowdown, Botswana has maintained its investment grade credit rating. However, in February 2010, one of the rating agencies, Standard and Poor?s imposed a minor downgrade while the other, Moody?s Investors Service, adjusted its outlook from stable to negative. Given the concerns about deterioration of the fiscal position at the time, these relatively modest adjustments reflected continuing confidence in the Botswana authorities to maintain prudent macroeconomic management. Nonetheless, as the agencies have stressed there is a clear need to improve the resilience of the economy through more effective pursuit of economic diversification.
* The full speech can be accessed from the Ministry of Finance website, here.