12 Oct 2020

Bank of Botswana (BoB) governor, Mr Moses Pelaelo, has underscored need to protect public confidence and value in the currency.

Mr Pelaelo told a parliamentary governance and oversight committee recently that such confidence contributed to the macroeconomic stability, which was required for the economy to function properly.

“If you lose macroeconomic stability in any county, all other policies including industrial policy, will not work,” he said.

He said inclusiveness of the economy was a positive sign for price stability, given that once citizens participated in the financial sector and had a stake, the economy would blossom.

Furthermore, the governor said the Banking Act was based on safety, soundness and prudence in banking, adding that it was anchored in ensuring that banks had a responsibility to take people’s money and use it to generate their own business.

“Remember the capital adequacy ratio at this stage is only 12.5 per cent, therefore the residual money that the banks are using to lend to you, belong to you, it is public money,” he said.

On other issues, Mr Pelaelo said the best practice in central banks included independence, transparency and accountability, adding that these were also enshrined in the code of International Monetary Fund (IMF) that Botswana subscribed to.

“In Botswana, we need an independent Central Bank and I am talking about operations, ability to determine the interest rates, ability to determine what the primary requirement reserves are going to be, ability to determine loan to value ratio,” he said.

Mr Pelaelo said it was therefore important for legislators to insulate the Central Bank’s independence from politics, and ensure that it had security of tenure.
Legislators had wanted to know the security of the money at the Bank of Botswana. ENDS