Essays on Fiscal Policy in Botswana

Abstract: Botswana’s economic growth has been exponential in the last forty years. This growth is against the backdrop of an impressive performance of the mining sector which was supported by an active fiscal policy framework. This provided additional fiscal space and resulted in macroeconomic and budget sustainability. However, the overreliance on the mineral sector has proven to be risky and compromises the country’s fiscal health position. For instance, higher economic growth rates experienced over these decades has, in the recent past, slowed as a result of depressed productivity in the diamond sector. In addition, there seemed to be no clear direction on the Southern African Customs Union (SACU) transfers. Furthermore, subdued total factor productivity (TFP) in the past decade also casts doubt on economic prospects while the continuous breach of expenditure rules undermines the credibility of fiscal policy. These developments suggest that the economic structure of Botswana is changing and the current fiscal policy model has not evolved in line with this dynamism. This mismatch exposes the economy to severe fiscal risk and necessitates a re-look at the country’s fiscal path with a view of enhancing policy efficacy given the changing structure of the economy. ..Ph.D. (Economics