Bloomberg News

Botswana’s Budget Deficit to Narrow as Spending Declines

August 01, 2011

(Updates with finance minister’s comments starting in fourth paragraph.)

Aug. 1 (Bloomberg) -- Botswana, the world’s biggest diamond producer, plans to cut its budget deficit to 6.2 billion pula ($960 million) in the fiscal year through March 2012 as it moves toward a balanced budget, Finance Minister Kenneth Matambo said.

The gap will probably narrow from 8.5 billion pula in the 2010-11 fiscal year as spending falls, Matambo told reporters in Gaborone, the capital, today after releasing the government’s budget strategy.

The southern African nation wants to eliminate its fiscal deficit by 2012-13 after a decline in demand for diamonds during the global economic crisis slashed revenue and widened the gap to about 15 billion pula, or 15 percent of gross domestic product, in 2009-10. Diamonds generate about 40 percent of income.

“The reduction in total spending in the coming financial year and beyond means that the major line items such as personnel emoluments, transfers to local authorities and public enterprises will have to decline,” Matambo said.

Government spending is forecast to drop to 28.5 percent of GDP in 2012-13 compared with 34.5 percent in 2011-12, he said.

The southern African nation’s economy will probably expand 6.8 percent this year, led by a recovery in demand for diamonds, he said.

Botswana refused state-worker demands during an eight-week strike that ended in June for a 12 percent pay increase, saying it was committed to reducing the deficit. The government wouldn’t raise its offer of 3 percent.

--Editors: Gordon Bell, Emily Bowers

To contact the reporter on this story: Jerry Bungu in Gaborone at jbungu@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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