Social protection financing and expenditure
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c Reduced debt and debt service payments. The Government was able to reduce its external debt and debt payments in such a way that the latter constitute less than 1 per
cent of current exports.
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This situation strengthens the fiscal position of the Government and opens up the possibility of allocating more funds to development-
oriented activities. d Declining dependence on ODA. The country also made strategic use of international
grants. During the first years after Independence, massive amounts of ODA were critical to finance public projects. As Botswana progressed and its exports grew, the
country started a substitution process between financial grants and export earnings.
The result of this long-term process was an enhanced capacity of the Government to collect revenues and to expand its public spending. When compared to other African
nations, revenue collection in Botswana is very much more efficient.
With regard to public spending, expenditure remained very similar in GDP terms between 1995 and 2008. By 2008 government spending was 38.4 per cent of GDP, 1.2 percentage
points below the 1995 level. Fiscal policy was characterized by strict discipline and prudence, despite the rapid growth of tax revenue collection during the last three decades.
The enhanced financial capacity of the Government of Botswana was, in fact, accompanied by an increase in social spending allocations within the public budget.
Although in net terms government spending remained practically the same from 1995 to 2008, social spending gained 1.9 percentage points of GDP and social protection 2.9
percentage points.
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Despite the net increments in those areas, the level of social protection can be considered low, given the relatively higher GDP per capita that Botswana enjoys compared to its
closest neighbours. In comparison with other nations with a much lower level of development, such as Cape Verde and Lesotho, social protection in Botswana is
substantially lower. Cape Verde, with a per capita GDP 3.8 times lower than Botswana, allocated 7.3 per cent of GDP to social protection programmes, while Lesotho, with a per
capita GDP 11 times lower, assigned 9.3 per cent of its GDP to social protection during the second half of the 2000s. Despite significant gains in investment in health between 1991
and 2008, for instance, current levels of expenditure on public health in Botswana 3.3 per cent of GDP lagged behind international recommendations around 5 per cent of GDP.
There is still considerable room for increasing social insurance and social assistance, given that public spending on both is in the range of 0.8 to 1.1 per cent of GDP. This is clearly
not enough for a country where 31 per cent of the population lives below the poverty line.
In sum, the positive conditions experienced by Botswana after its Independence in 1966 created an appropriate environment for stepping up government spending. The
Government took advantage of these favourable conditions and expanded revenue collection and public spending, with important allocations of resources to the social
sectors. Expenditure on the social sector actually increased as a share of GDP and as a share of total spending, a reflection of strong political will. However, two important factors
characterized investment in social protection:
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International rating agencies usually evaluate Botswanas sovereign credit with an A.
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Housing, on the other hand, decreased by 2.8 percentage points.
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a With the exception of education 8.5 per cent of GDP in 2008, the level of investment in other social areas has lagged behind optimal levels. In the specific case
of social insurance and social assistance programmes, current allocations of resources are low considering the existing poverty conditions and high GDP per capita in the
country.
b The 2000s yielded a moderate performance in the creation of fiscal space for social protection.
4.4. Policy considerations and lessons learnt 4.4.1. Policy considerations
Recent economic conditions, characterized by an international crisis that led to a significant decline in demand for diamonds, have created a climate that is conducive to a
review of Botswanas overall social policy. The comparison of the countrys high GDP per capita with its moderate to high poverty rates provides the rationale for stepping up social
protection allocations, particularly in the form of social assistance and social insurance. The experience of Botswana shows that rapid growth is not sufficient to reduce poverty,
and it is therefore important to strengthen the Governments capacity to inject funds into social protection programmes. Given their current level, some of the typical fiscal space
generators such as debt relief and ODA are likely to play a very limited role in the foreseeable future.
Alternative policy measures to create additional fiscal space for social protection programmes might include:
a a production diversification strategy. The decline in fiscal taxes following the decline in diamond exports is a signal that strong dependency on a single product is
undesirable in terms of economic sustainability. Certainly the country is opening up other sectors, such as tourism and textiles, but mining still accounts for 44.7 per cent
of GDP against 47.9 per cent in 2001. A review of the diamond agreement might also be considered.
b the recent increase in the value added tax from 10 per cent to 12 per cent
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, which is seen as an excellent opportunity for raising allocations for social protection.
c the re-evaluation of existing social assistance programmes. The current system is highly fragmented, with multiple initiatives of a non-conditional nature and very
different target groups. In some cases coverage is quite low. Some programmes may remain, but the country should start thinking in terms of a different generation of
public programmes, including the conditional cash transfer type. This could be an interesting option for a country that ranks 125th in the Human Development Index
and where poverty affects over 30 per cent of the population. The improvement of education and health conditions demands the implementation of more cost-effective
programmes to improve the living standards of the population. A more integrated strategy would also yield benefits in terms of reduced administrative costs, better
coordination and improved targeting.
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http:www.finance.gov.bwindex.php?option=com_content1parent_id=334id=358
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d the creation of a general social security pension scheme. This is a solution that the Government of Botswana might wish to take into consideration as a means of
expanding its fiscal space.