Country Report Botswana June 2008

Outlook for 2008-09

• The ruling Botswana Democratic Party (BDP), under the new president, Ian Khama, will remain in power over the forecast period, and is expected to win the 2009 legislative election, continuing its decades-long period in office.
• The government will continue to pursue largely prudent policies in 2008-09 that support macroeconomic stability and financial discipline. No major change in policy direction is expected under Mr Khama.
• The Economist Intelligence Unit forecasts real GDP growth of 4.1% in national accounts year 2008/09 (July-June), rising marginally to 4.4% in 2009/10, driven largely by infrastructure spending and increasing mining activity.
• Rising international food and oil prices are expected to push Botswana’s inflation up to an average of 11.5% in 2008, but upward pressures are forecast to ease in 2009, allowing average inflation to fall to 10.5%.
• The current-account surplus is forecast to narrow from 12.3% of GDP in 2008 to 10.4% of GDP in 2009, in line with falling receipts from the Southern African Customs Union and a narrowing trade surplus.

Monthly review

• BDP members are showing strong support for Mr Khama and his policies; the president’s popularity among the public has been boosted by his visits to local areas to hear the concerns of ordinary people.
• Opposition parties have struggled to deal with Mr Khama’s popularity; their efforts to discredit the new president have gained little public attention.
• The by-election for the Serowe North West parliamentary constituency has been scheduled for June 21st, with the ruling party, represented by the president’s brother, Tshekedi Khama, expected to win comfortably.
• The opposition Botswana National Front has experienced deepening internal divisions; its youth and women’s leagues have called for the party leader, Otsweletse Moupo, to resign.
• Botswana has maintained the openly critical stance towards Zimbabwe adopted by Mr Khama, as Zimbabweans continue to flood into the country and new refugee camps have been established in Botswana.
• The Bank of Botswana has raised its benchmark bank rate by 50 basis points from 14.5% to 15%, following an increase in year-on-year inflation to 11.1% in April, as a result of rising food, fuel and electricity prices.
• The Mmamabula Energy Project is facing further delays because of problems in securing an engineering, procurement and construction (EPC) contract, with the total cost of the first phase of the project now estimated at US$9.5bn.