This article examines the debate about the growth of government expenditures in
Botswana. It outlines the pattern and rate of government expenditure growth and then
presents some empirical findings on the determinants of government expenditures in
Botswana during 1980-2000. Previous studies on government expenditure growth in
developing countries have identified the determinants of the growth to be expenditures
on social welfare, the openness of the economy and growth in military spending. The
variables employed in the present study are: National income, the level of monetization,
openness of the economy, government revenues and expenditures on social services.
The empirical results of this study demonstrate the very high explanatory power of the
model. All the variables have the expected signs. The results show that national income,
the openness of the economy and the expenditures on social services are the significant
variables that determine the growth of government expenditures in Botswana. The
findings show that, statistically, expenditure on social services is the most significant
determinant of government expenditure growth in Botswana.
There is a growing debate about the growth of government expenditures in Botswana. One
view is that there should be slow growth in government expenditures to match the productive
capacity of the economy. The opposite view, however, is that government expenditures should
expand rapidly in order to create a welfare state in Botswana.
The purpose of this paper is to analyze the economic rationale and implications of
government expenditure growth in Botswana. The paper is divided in two main parts, excluding
the introduction. The first part of the paper reviews the determinants of government expenditure
growth in developing countries and then outlines the pattern and rate of government
expenditure growth in Botswana. The reference point in the analysis of Botswana is 1980
because it was during the 1980s that the multiplier effects, i.e., benefits of the mineral boom
were vividly manifest; for example, in the patterns of government revenues and expenditures
in the country. The second part of the paper presents some empirical findings on the determinants
of government expenditures in Botswana. This is followed by a summary and conclusions.
In a market economy, there are at least three core functions that the government is expected to
perform and these are, to: (i) allocate resources, through the provision of public goods and
services, (ii) distribute income and wealth, through taxes and expenditure programs, and (iii)
stabilize the economy by such instruments as monetary and fiscal policies. When it performs
these functions well, the government provides the basis for efficient markets and thereby
enhances economic growth. Thus, in essence, the role of government in a market economy is
to create an environment conducive for economic growth. This fact has never been in dispute.
Rather, what seems to be debatable is the degree but not the substance concerning the role of
government in the economy. Economists have often argued that, when government expands
beyond these core functions, it retards economic growth. |
