The effects of the global financial crisis of 2007-2008 on public sector projects in Botswana during 2008-2010

Abstract

This dissertation focuses on the effects of the global financial crisis of 2007-2008 on public sector development projects in Botswana during the period 2008-2010. A documentary research strategy was used to execute this study. Data was collected and analysed in relation to the sectors of importance, which were agriculture, extractive industries, transport and communications, hotels and restaurants amongst others. Expectation was that as the financial crisis was felt globally, the economy of Botswana would not be exceptional. However, in assessing the effects of the financial crisis under the different public and private sectors, it showed that not all effects were felt at the same time. For example, the main economic sector in Botswana, mining, which falls under the ambit of extractive industries, was more affected than other, non-mining, sectors. The government, however, employed effective strategies to counter this situation. It eased monetary policy so as to ensure price stability and to keep inflation rates within the desired range of between 3-6%. Another strategy was that government stimulated domestic demand through an expansionary fiscal policy. In executing such strategies, the government wanted to ensure a stable fiscal and monetary environment which was sustainable and in line with comparators in the region. With the effects of the crisis on public and private sectors, felt at different levels and at different times, the country however weathered to the crisis and was able to move forward in the post-crisis period. Though, challenges of high inflation rate amongst others still remain, this had existed prior the years of crisis. Post crisis, as from 2001 until 2013, Botswana inflation rate averaged 8.3% reaching an all-time high of 15.1% in August of 2009. Keeping this rate within the desirable ranges is still a challenge. With the non-mining sector performing well despite the recession, government has recommended diversification of this sector together with the private sector to become the alternative engines of growth for the economy. Results suggest that the economy was significantly affected by the crisis and it is my recommendation that the diversification strategies be employed.