The central bank governor has warned that the country’s current growth model will be difficult to sustain going forward.
Moses Pelaelo, the Bank of Botswana (BoB) attributed the forecast to the economy’s export potential that has shrunk over the past five years, as a proportion of the GDP.
“Therefore there is an urgent need for rejuvenation by redesigning the country’s industrial policies to promote exports and, given the size of the domestic market, to grow the private sector through a better integration into regional and global value chains,” said Pelaelo.
The governor further said despite the large public investment in infrastructure and related social spending by government, the narrow economic base persists, with limited success on economic diversification.
He implored for the development of the non-tradables sector and addressing gaps in the quality of the regulatory frameworks, human capital and innovation to boost global competitiveness.
Pelaelo said a thrust required is to galvanize efforts towards structural and economic transformation as well as harnessing opportunities enabled by the fourth industrial revolution by up scaling investment on digital infrastructure, adoption of ICT and digital skills.
The call for heightened diversification effforts comes, the governor’s recent plea for the government to change some of the country’s policy for the economy to achieve high-income status.
Addressing the President Mokgweetsi Masisi and his cabinet in June Pelaelo said authorities should help the economy escape the middle-income trap.
“Comparative country studies and experiences suggest that deliberate promotion of large-scale industries and dedicated implementation of industrialisation policies is instrumental to successful escape from the middle-income trap and transition to high-income status,” said Pelaelo.
The governor said any post-COVID-19 recovery plan or programme should integrate within it, the transformation agenda and lay the path for, or propel the, transition to high-income status.
He said the bank will remain fully aligned to the long-term economic objectives of the country, committed to contributing to macroeconomic stability, financial sector development.
“We will also rededicate our efforts to judiciously manage the nation’s foreign exchange reserves through the revised reserves management policies and investment guidelines. The envisaged modernisation of the Bank of Botswana Act and the institutional governance arrangements should help strengthen the Bank’s performance and roles in this regard,” said Pelaelo.