IMF: Botswana needs to diversify economy, address income inequality

By AT editor - 9 June 2018 at 3:41 am
IMF: Botswana needs to diversify economy, address income inequality

Botswana continues to be an economic bright spot in southern Africa, with the latest International Monetary Fund (IMF) assessment showing a rebound from slower GDP growth in 2017 that’s tied to stronger diamond sales and higher government spending.

The IMF assessment team, led by Enrique Gelbard, completed a visit to Gaborone last week. They met with Ontefetse Kenneth Matambo, the finance and economic development minister, as well as the head of Bank of Botswana and other officials.

The country’s growth slowed to 2.4 percent in 2017, but is expected to reach 4.6 percent this year, according to the latest revision released by the IMF last month. That revision took a guarded view of regional impacts affecting Botswana, primarily because of neighboring South Africa’s struggling economy.

“In the medium-term, and in line with their track record of prudent policies, the (Botswana) authorities aim at achieving a fiscal surplus,” Gelbard said in his report. To do so, they’ll need to focus on reforms and reduce income inequality, including consideration of a more progressive personal income tax.

While the diamond sector holds good news in the short term, Botswana needs to focus on strategies to diversify its economy, the IMF said.

“The diversification and job creation effort requires focus on prompt and bold market friendly reforms that can reduce the costs of doing business, improve skills in the labor force, make the public sector more efficient, privatize key enterprises, and enable competition and entry of firms in sectors with latent comparative advantage,” Gelbard said.

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