The Central Bank, Bank of Botswana (BoB) says the current and prospective environment is challenging for Botswana and thus requires renewed preparedness and structural reforms with respect to policy frameworks.
Speaking recently at the annual BITC Global Expo, BoB Governor Moses Pelaelo said in the last few decades, globalisation, openness, decentralisation of business value chains and associated increase in trade provided impetus to global economic growth.
Pelaelo observed that a conducive domestic environment should be maintained, including robust and facilitative institutions. He added that focus areas such as macroeconomic and financial stability, fiscal sustainability and institutional support should be looked into. He also stated that there are several benefits to be derived from sustained low and predictable level of inflation, backed by a credible policy framework and a stable financial environment. Pelaelo said that such an environment fosters savings mobilisation, productive investment and international competitiveness of domestic producers.
“There have been major challenges facing the economy in the recent past, significant and sustained progress has been achieved with respect to price stability,” said.
He further said a supportive exchange rate policy is another element of macroeconomic stability. He added that for Botswana, the focus is on stabilising the inflation-adjusted trade weighted exchange rate in order to maintain price competitiveness of domestic industries.
Turning to fiscal sustainability, the Governor stated that judicious management of foreign exchange reserves for a country dependent on trade also ensures uninterrupted access to foreign currencies to sustain business operations. He observed that despite weak global economic performance and other unfavourable factors in recent years, Botswana’s external position has remained relatively strong. He added that foreign exchange reserves currently amount to 7.4 billion US dollars, representing approximately 18 months of import cover or 53 percent of GDP.
“Standard and poor’s affirmed Botswana’s sovereign credit rating of ‘A-‘ for long-term bonds and ‘A-2’ for short-term bonds in domestic and foreign currency denominated borrowing, albeit with a negative outlook,” he said.
Pelaelo further said that for overall success, other similar institutions and those in the regulatory sphere should demonstrate continuing effectiveness. He gave an example that beneficial regulation of competition and market conduct as well as existence of a robust legal framework that guarantees protection of property rights are necessary for businesses to prosper. He added that it is important for Botswana to take advantage of progressive international and regional trade agreements and integration arrangements to promote industrialisation.
“Facilitative, rather than obstructive, interaction between business and supportive institutions, regulatory bodies and government officials should help in unlocking opportunities for economic growth that are inherent in business operations, entrepreneurship and an innovative spirit,” said Pelaelo.