Will The World Bank Loan Help With Botswana's Economic Recovery And Transformation?

On Friday, the World Bank announced that it had approved a $250 million (around P2.6 billion) loan to Botswana to support the country's implementation of its Economic Recovery & Transformation Plan. The Programmatic Economic Resilience and Green Recovery Development Policy Loan (DPL) is designed to strengthen the country's COVID-19 pandemic relief and also bolster resilience to future shocks.

According to the World Bank, the DPL is also designed to support reforms to strengthen private sector development and also promote green recovery. The loan is the World Bank's first-ever support for Botswana's national budget and is the first of two planned budget support operations.

The COVID-19 pandemic has seen Botswana experience its worst-ever budget deficit for the 2020/21 financial year, totaling a whooping P21 billion or 11% of GDP.  The pandemic also offset a GDP contraction of 7.9%, again the highest in the country's history, which saw a reduction of the country's fiscal buffers like the foreign reserves which plummeted from P69 billion to P59 billion between 2019 and the end of 2020.

The World Bank further states that the budget support operation is meant to support government reforms to ensure social spending reaches the poorest and also support reforms that are meant to attract private sector investments, contribute to the diversification of exports and increase job opportunities towards a green economy.

Some of the reforms to be supported financially and technically by the loan operation include the implementation of a Single Social Registry (SSR), a database system that will assist in the harmonization and consolidation of social protection programs. Another reform to be supported by the operation is the strengthening of a business environment that will lead to increased SME-led job creation and economic diversification through improved access to finance for individuals and SMEs.

With regards to promoting "green recovery", the loan will support reforms to increase production of renewable energy by independent energy producers, promoting and regulating rooftop solar energy generation also embedding climate change consideration in environmental assessments.

Development policy loans are normally used by the World Bank to support a country's policy and institutional reform agenda in order to help accelerate inclusive growth and poverty reduction. The government's reforms to be supported by this particular DPL are progressive and admirable and as citizens, we can only hope that their practical implementation will match their theoretical brilliance. 

The fact that the World Bank will be also offering technical assistance in the implementation of the reforms is perhaps a sigh of relief because at least it means government, which does not have a good track record of using funds appropriately, will not have free reign. Loans like these have to be utilized efficiently and effectively for socio-economic progress which will benefit current and future generations so that when the time comes to back them back with interest, their tangible benefits can be pointed at.