Bloomberg News

Botswana Budget Surplus to Narrow as Growth Slows

February 04, 2013

Botswana’s budget surplus will probably narrow next year as economic growth in the world’s biggest producer of diamonds slows, Finance Minister Kenneth Matambo said.

The southern African nation will have a surplus of 779 million pula ($97.4 million), or 0.6 percent of gross domestic product, in the year through March 2014, Matambo said in a speech to parliament today in Gaborone, the capital. That compares with 835 million pula this fiscal year, he said.

“It remains crucial to exercise restraint in government spending, focusing only on national priority areas and replenishing our reserves to levels that can sustain unforeseeable future shocks,” Matambo said. “It is, however, unlikely that in the next few years the economy will reach the pre-financial and economic crisis real growth rates of nearly 9 percent.”

The economy of Botswana, which has the highest credit rating in Africa, will probably expand 5.9 percent this year, down from 6.1 percent in 2012, the minister said.

The government decided against buying a stake in De Beers (AAL), the world’s largest holder of diamond reserves, in July to help meet its target for a budget surplus. Botswana owns 15 percent of De Beers through Debswana Diamond Co. Ltd., the state-owned diamond miner.

Economic growth slowed in the third quarter to 5.7 percent as diamond output dropped 39 percent, the statistics agency said on Jan. 3. The nation gets about 40 percent of its revenue from diamonds.

The government has curbed spending by cutting wages for state employees. It will also sell 49 percent of state-owned Botswana Telecommunications Corp. and retain the remaining 51 percent of the company, Matambo said. The country has 28.7 billion pula of debt, amounting to about 23 percent of GDP.

Botswana has an A2 credit rating at Moody’s Investors Service, with a stable outlook. The pula, which is pegged to a basket of currencies including South Africa’s rand, gained 0.9 percent to 8 against the dollar as of 4:38 p.m. in Gaborone.

To contact the reporters on this story: Andres R. Martinez in Johannesburg at amartinez28@bloomberg.net; Koobonye Ramokopelwa in Gabarone at kramokopelwa@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net


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