Source: www.mmegi.bw                         Date: 17 August, 2010

A delegation of Mongolian MPs recently visited Botswana to learn how the country has successfully managed revenues from minerals. The MPs are members of the Standing Committee on the Budget and such were interested in minerals as well as fiscal policy. Mongolia has decided to study practices in Botswana, Norway and Chile before formulating its own policy.

The Minister of Finance and Development Planning, Mr. Kenneth Matambo, told the delegation that at independence in 1966, Botswana was one of the 25 poorest countries in the world and depended on grants from the United Kingdom to finance the government budget. When diamonds were discovered in the 1970s it created an opportunity to start economic development. Revenues were channeled to develop infrastructure, and water, health care, primary education and roads network were identified as priority sectors. Agriculture was also emphasized as most people in Botswana were dependent on subsistence farming.

Rapid economic development was achieved by saving part of the revenue surpluses for the future. At the end of April, 2010, the accumulation was enough to cover19 months of the country’s import needs. The accumulated reserves were partly used to finance part of the huge budgetary deficits that followed the recent economic and financial crisis.

Mr. Matambo advised the Mongolian MPs not to get excited over the sudden influx of mineral revenues and urged them not to spend these on increased and unproductive consumption. Instead, they should be invested in areas that ensured sustainable development. Botswana’s economic planning is based on the principles that it is not advisable to be excessively dependent on natural resources because they are exhaustible, that economic crises can always recur, and that it is more sensible to have a diversified economy, instead of one overly dependent on minerals.