2. What is an ESP?
• Economic Stimulation refers to the use of monetary and fiscal policy
changes by the government to kick-start a struggling economy.
• An ESP is a package of economic measures put together by the
government to stimulate a lagging economy.
• This idea started gaining popularity post the 2008-2009 financial crisis
3. Attributes of a struggling economy
• Prolonged low inflation rates
• High unemployment rate
• Declining GDP
• Prolonged budget deficit
4. Ways of stimulating the economy
• Monetary Policy
lowering interest rates
quantitative easing
• Fiscal Policy
increasing government spending
reducing taxes
• Increased attraction of Foreign Direct Investment
5. Botswana’s Economic Status
• Inflation rates reached a low of 2.8 % in 2015
• Interest rates were cut to 6% from 6.5% in August marking the lowest
in history
• Exchange rates have been stable
• Projected GDP has reduced from 4.9% to 2.6%
• Projected surplus of P1.2 billion was revised to a deficit of P4 billion
• Reserves as at August 2015 were P87.8 billion.(19 months import
coverage)
• Unemployment stands at 20%
6. Government ‘s Proposed Economic stimulus
package
• Government has decided to use an unspecified proportion of its foreign
reserves to boost the economy.
• The targeted sectors are:
Agriculture: additional projects in special economic zones.
increase import substitutions
Energy and water: new water recycling technologies in key areas
additional units to Morupule plant
Tourism: creation of community trusts targeting tourism
Acceleration of the hospitality industry
7. Cont’……
Infrastructure: construction of roads
completion of backlog projects
construction of school
land servicing
construction of more BHC houses
Health : conversion of health posts into clinics
Manufacturing and services : manufacturing import substitutes
8. Good or bad move?
Positive attributes
Good timing . The economy is in need of stimulation.
The targeted sectors are labour intensive
The reserves were more than adequate according to the benchmark
of six months import coverage
possible increase in GDP
Govt spending>investment>employment>consumption
Possible increase in interest rates and inflation
Improved infrastructure, attraction of FDI (increased MNC activity).
9. Good or Bad move?
Negative attributes
Balance of trade
Currently Botswana is a net importer therefore with the
implementation of the stated projects we are going to import more
machinery and other resources which will lead to a further
deterioration of the balance of trade.
Short term employment
Construction jobs are not sustainable
Current energy crises will hinder the desired effects. the targeted
sectors are water and electricity intensive.
10. Cont’……..
Botswana has a poor project implementation track record
VISION 2016 failure
Palapye glass manufacturing failure(tendering )
National stadium flop
Metsimotlhabe western bypass (mal administration)
Bolus project
Morupule B ‘s failure
Interest rates have just been reduced. was monetary policy given a
chance to produce results?
11. Cont’…..
Use of reserves might give negative signals to foreign direct
investors.
Botswana ‘s credit rating might decline
Botswana ‘s current problem is not necessarily unemployment but
skills mismatch. So is the problem being solved by ESP?
