30 May 2013

Foreign exchange reserves fell slightly from P60.3 billion at the end of 2011 to P59.3 billion at the end of December 2012.

Presenting the Bank of Botswana 2012 annual report during a press conference, the bank’s governor, Ms Linah Mohohlo said the reduction in the level of reserves was due to competitiveness supported by an overall 1.3 per cent depreciation of the nominal effective exchange rate (NEER) which partly offset appreciation of the real effective exchange rate.

She said the residual appreciation of the NEER by 1.9 per cent was expected to be absorbed by gains in productivity, quality improvement and delivery efficiency.

Ms Mohohlo said during the course of 2012, the bank’s monetary and other policies were conducted against the backdrop of a sluggish global economic recovery beset by high debt, higher unemployment in major industrial countries and lower inflation. 

The governor said emerging markets and developing economies led the global economic growth, although they were undermined by trade links with developed economies, which registered much weaker economic growth.

Similarly, Ms Mohohlo said the domestic economy was affected by contraction of the mining production due to slack in demand for mineral exports, in contrast, the non-mining sector was buoyant. 

She explained that the moderating effect of lower global inflation and fiscal consolidation on domestic price developments was counteracted by the impact of the increased administered prices and higher cost of food. Nevertheless, Ms Mohohlo said inflation fell from 9.2 per cent in December 2011 to 7.4 per cent at year-end, but still exceeded the medium-term objective range of 3-6 per cent.

She said in a bid not to undermine economic growth, the Bank rate was unchanged at 9.5 percent adding that there was also the 23.6 percent increase in credit, compared to the 26.4 per cent growth rate of the previous year.

Ms Mohohlo said external relations strengthened further during this year and that activities included economic briefings for a variety of stakeholders and consultations with relevant international institutions, as well as attendance of the meetings of the Association of African Central Banks, Committee of SADC Central Bank Governors, IMF, World Bank and Bank for International Standards.

Ms Mohohlo said the Banking sector expanded its activities and remained soundly managed and profitable adding that the combined sector’s financial position grew by 12.4 percent to P58.2 billion within which the market share of smaller banks increased. ENDS