World Markets

Botswana to narrow budget deficit to 5.9% of GDP next year on diamonds

Credit: REUTERS/SIPHIWE SIBEKO

Botswana expects its budget deficit to narrow to 5.9% of GDP next year from 7.89% in 2020 on a recovery in diamond revenue, a previously unpublished budget blueprint seen by Reuters showed.

By Brian Benza

GABERONE, Oct 28 (Reuters) - Botswana expects its budget deficit to narrow to 5.9% of GDP next year from 7.89% in 2020 on a recovery in diamond revenue, a previously unpublished budget blueprint seen by Reuters showed.

In the 2020 fiscal year which ends in March 2021, mineral revenues were expected to halve to 10.5 billion pula ($917.70 million), as COVID-19 hurts diamond sales, but the global market is showing signs of recovery and authorities now see a 50% jump in diamond receipts to 15 billion pula in 2021.

Higher diamond income and increased taxes are expected to lift total revenue 12% to 58.8 billion pula in 2021 while spending will rise 5% to 71.4 billion, leaving a deficit of 12.58 billion pula or 5.9% of GDP.

"At this rate, the deficit still exceeds the country's indicative threshold that a budget deficit in any year should not exceed 4.0 percent of GDP," the document said.

"On a more positive note, however, there has been a robust recovery in diamond trading in September 2020, which if sustained would underpin a stronger recovery through the rest of the year and into 2021," reads the 2021 Budget Strategy Paper.

Finance minister Thapelo Matsheka told Reuters last week that the country has already approached the World Bank for budgetary support and discussions were ongoing.

The paper reiterated a forecast from last week that the economy will rebound to a growth rate of 7.7% in 2021, from a contraction of 8.9% this year on improved sentiment in the global diamond industry, as well as the lifting of domestic movement and lockdown restrictions.

De Beers, which sources the bulk of its diamonds from Botswana, this month announced a 57% jump in sales at its September sales to $467 million compared to the same period in 2019.

($1 = 11.4416 pulas)

(Reporting by Brian Benza; Editing by Tim Cocks, Catherine Evans and Emelia Sithole-Matarise)

((tim.cocks@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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