16 Jul 2020

The Bank of Botswana’s (BoB) total assets have declined by P6.2 billion from P72.2 billion in December 2018, of which P65.2 billion was foreign exchange reserves.

This was said by the chief financial officer, Mr Daniel Loeto when briefing the media on BoB’s annual report on July 14.

Mr Loeto said in foreign currency terms, foreign exchange reserves decreased from US$6.7 billion to US$6.2 billion in the same period.

He noted that foreign exchange reserves were equivalent to 13 months of import cover of goods and services, stating that the decrease reflected a drawdown from the Transaction Balance Tranche (TBT). He attributed  that to domestic foreign exchange demand and the resultant net capital outflows.

He said the net income of the bank for 2019 was P7 billion compared to P2.9 billion in 2018 after the transfer of non-distributable currency losses of P782 million to the currency revaluation reserves and market valuation gains of P3.6 billion to the market revaluation reserves. He said net distributable income to government was P4.1 billion,  which was lower than the P4.8 billion in 2018.

 Mr Loeto said the performance exchange rate policy continued to focus on the maintenance of a stable and competitive exchange rate of the local currency.

He, however, said a 0.3 per cent upward crawl was implemented to stabilise the real effective exchange rate (REER) in 2019.

Furthermore, he said the Pula basket weights were maintained at 45 per cent and 55 per cent for the South African Rand and the Special Drawing Rights (SDR) respectively.

Mr Loeto said the REER depreciated by 0.4 per cent year-on-year to December 2019 due to lower inflation than in trading partner countries with the differential being larger than the upward rate crawl.

He said the banking industry was assessed to be safe and sound during 2019, and that all banks met the minimum prudential requirements as set out in the Banking Act and the banking regulations.

He added that the overall banking sector’s balance sheet increased by 8.1 per cent from P91.3 billion in 2018 to P98.7 billion in 2019. He also noted that deposits grew by 9.3 per cent from P69.3 billion in 2018 to P75.7 billion in 2019.

Mr Loeto said loans and advances also increased by 7.6 per cent from P58.3 billion in 2018 to P62.8 billion in 2019 while the financial intermediation ratio declined from 84.2 per cent in December 2018 to 82.9 per cent in December 2019.

He said the pace of resource mobilisation of 9.3 per cent exceeded the 7.6 per cent increase in bank credit. He explained that overall annual credit growth decreased slightly from 7.7 per cent in December 2018 to 7.6 per cent in December 2019.

He highlighted that the slight decline was due to a contraction in credit extended to the business sector in the same period.

However, he said growth in lending to households increased during the period due to higher demand for personal loans influenced by the increase in public service salaries.

In his welcome remarks, BoB governor, Mr Moses Pelaelo said the bank successfully implemented the 2019 work programme and achieved its policy objectives for the year notwithstanding challenges in the domestic and external environment.

Mr Pelaelo also stated that global economic activity was modest in 2019 with growth of 2.9 per cent compared to 3.6 per cent in 2018. He noted that it reflected a slower pace of increase in global demand. BOPA