03 Feb 2015

The Minister of Finance and Development Planning says government’s net financial asset position has improved significantly.

Delivering the 2015 budget speech in Parliament on February 2, Mr Kenneth Matambo explained that at the end of March 2014, government’s net financial asset stood at 1.7 per cent of Gross Domestic Product (GDP). "This is an improvement from the negative 6.9 per cent of GDP in March 2013". 

He attributed such to government’s balances at the Bank of Botswana rising from P20.61 billion to P31.75 billion over the 2013/14 financial year, while net debt and guarantees had increased only marginally over the same period, from P28.33 billion to P29.52 billion.

“We expect our net position to continue to improve further by the end of the current and coming financial years. 

However, we need to decrease our net debt and increase our balances in the Government Investment Account if we are to be in a position to absorb a major external shock of the magnitude we experienced in the financial years 2008/09 and 2009/10,” he said.

The minister also highlighted that the exchange rate between the Pula and basket of currencies was managed through a crawling band mechanism based on the differentials between expected inflation in the country and its major trading partners.

 He said any significant divergence between the expected inflation rates in Botswana and its trading partner countries normally led to an adjustment of the rate of crawl to maintain a competitive real effective exchange rate.

“Consistent with the crawling band exchange rate mechanism, the real effective exchange rate marginally depreciated by 0.5 per cent during the 2014, reflecting the effect of the 0.16 per cent annual downward crawl rate and the narrowing inflation differential between Botswana and trading partner countries. 

A competitive real effective exchange rate is necessary for export promotion as it ensures competitiveness of the domestic producers in the global market,” he said.

In terms of the bilateral exchange rate movements, Mr Matambo noted that the Pula depreciated by 2.4 per cent against the SDR while it appreciated by 1.7 per cent against the South African Rand by the end of December 2014. 

He said against the individual Special Drawing Rights composite currencies, there was mixed performance with the Pula weakening against the US Dollar and British Pound by 8.3 per cent and 2.9 per cent respectively while it appreciated by 4.0 per cent against the Euro and 4.5 per cent against Japanese Yen. ENDS