Africa Botswana Currency Economy Export Finance

Botswana sets currency to lose value faster in 2021

Botswana has set its pula currency to lose value at a faster rate this year, a senior official said Monday, as it seeks to boost export competitiveness after the COVID-19 pandemic has had a deep impact on diamond sales that are central to its economy.

In the biggest shift for many years, the government has set the pula to lose 2.87% this year from 1.51% in 2020.

Already in 2020, the rate marked a big change from previous years when the adjustment was less than one percent.

Botswana uses a crawling band exchange rate regime under which the pula is pegged to a basket of currencies, including the South African rand.

Its value is adjusted upwards or downwards at the beginning of each year using a rate of crawl that factors in the inflation differential between Botswana and major trading partners.

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The currency basket was kept at 45% to the rand and 55% to the IMF’s special drawing right currencies.

“The downward rate of crawl reflects the need to contribute to the easing of real monetary conditions, while supporting domestic industry’s competitiveness, in the absence of significant inflationary pressures in the economy,” Wilfred Mandlebe, permanent secretary in the ministry of finance and economic development, said in a statement.

International diamond sales, which make up 80% of Botswana’s exports, had just begun to recover from a weak 2019 when the COVID-19 pandemic knocked them back again.

They dropped 42% to US$1.49B in the first nine months of 2020 versus a year ago and production fell 29% to 12.3 million carats.

Source: Reuters

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