Botswana plans currency depreciation

Botswana plans to permit a 1,51 percent depreciation of its currency against a basket of other currencies in 2024, as it expects that local inflation will surpass price growth in the economies of its trading partners.

The annual downward crawl, akin to last year’s rate, will occur through minor daily adjustments that would equal 1,51 percent over the year until December, as stated by the Finance Ministry in a Thursday announcement, Bloomberg reported.

The Treasury had previously targeted a 2,87 percent depreciation of the local currency in 2021 (compared to 1,51 percent in 2020) to enhance the country’s export competitiveness, but it believes further measures are necessary.

According to the minister, the need for a downward adjustment in the pula “is a reflection of weak production capacity and productivity of the economy,”

“It is also inflationary, ultimately affecting price competitiveness,” he added

The pula is pegged to a basket of foreign currencies, with the South African rand accounting for 45 percent, and the remainder consisting of International Monetary Fund reserves known as special drawing rights (SDRs).

SDRs include the US dollar, British pound, euro, yen, and renminbi. Botswana then applies an annual crawl rate to the currency.

Gaborone, Botswana, ranks among the top ten African cities with the highest purchasing power. Additionally, the country is recognized as one of the ten best African nations for investment.

The country has high foreign exchange reserves, which have enabled it to weather the pandemic-induced economic storm better than most.

The Pula Fund, a sovereign fund created in 1994 that finances a large part of the budget deficit, has meant that fiscal dependency on a debt has been low. —Business Insider Africa

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