The Bank of Botswana (BoB) posted a sharp decline in annual profits for the year ended December 31, 2024, as a cocktail of external shocks, shrinking reserves and weakening diamond revenues continued to weigh heavily on the central bank’s financial performance.
The central bank’s latest financial statements show total comprehensive income fell to P5.8 billion, down from P8 billion in 2023. The decline, according to the BoB, was largely driven by reduced earnings from foreign exchange reserves, alongside unrealised market and currency valuation losses. Volatility in global financial markets and heightened geopolitical tensions combined with sticky inflation to hit reserve performance.
As at December 2024, the foreign reserves stood at P48.1 billion—down 24.5 percent from P63.7 billion the year before. In US dollar terms, they dropped from USD4.8 billion to USD3.5 billion, while SDR holdings slipped from SDR3.5 billion to SDR2.7 billion. The result: a worrying contraction in import cover to just 6.3 months, the lowest in over two decades.
With the economy shrinking by two percent in the 12 months to September 2024—largely due to poor performance in the diamond sector—the central bank moved to ease monetary conditions. The Monetary Policy Rate was cut by a cumulative 50 basis points to 1.9 percent, and the Primary Reserve Requirement reduced to zero by year-end. This was in response to tight liquidity conditions that saw outstanding Bank of Botswana Certificates fall from P6 billion to just P1.2 billion.
Despite these interventions, the balance of payments registered a P20.9 billion deficit, a reversal from the previous year’s surplus. The country’s investment-grade credit rating held steady, but S&P changed its outlook to negative, citing growing fiscal risks stemming from weak mineral revenues.
