Auditor general warns of rising government debt

The Auditor General expressed concerns about the government’s borrowing practices, highlighting a significant increase in total outstanding debt in the 2021/22 financial year. The increase was attributed to both external and domestic borrowings.

In a report on Botswana’s annual financial statements ending March 2022, Accountant General Kealeboga Molelowatladi noted that total outstanding debt increased significantly by 20% to P40.93 billion. This is a significant increase from the previous fiscal year.

Molelowatladi detailed that external debt, including guarantees, stood at P23 billion, up 14% from the previous year. This increase was driven by two major budget support loans: a $250 million loan from the World Bank Group (International Bank for Reconstruction and Development, IBRD) and a $137 million loan from the African Development Bank (AfDB). These loans are essential to support the government’s post-COVID-19 economic recovery plan.

Domestic debt, including guarantees, also increased to P25.31 billion, up 14% compared to March 2021. This was mainly due to the expansion of the P30-billion note issuance program, which increased the frequency of government securities auctions from quarterly to monthly. The program’s ceiling was raised from P15 billion in 2020 to address constraints identified in the 2019 domestic bond market review.

Total debt to gross domestic product (GDP) stood at 22.3% at the end of fiscal year 2021/22. External debt stood at 10.6% of GDP, while domestic debt stood at 11.7% of GDP.

Finance Minister Peggy Serrame assured Congress that she will continue to manage the public debt portfolio prudently in accordance with legislation. She requested an increase in the ceiling on government bond issuance from 30 billion pesos to 55 billion pesos, a proposal that was approved by Congress.

Serame explained that raising the bond ceiling will keep the country’s public debt exposure within the legal limit of 40% of GDP. Currently, total public debt, including guarantees, stands at 20.59% of GDP, of which external debt accounts for 9.54% and domestic debt accounts for 11.05%. However, she acknowledged that there are risks associated with raising the bond ceiling, such as interest rate, refinancing and inflation risks.