Tuesday, March 5, 2024

Credit growth sluggish but outpaces deposits

The recently released financial statistics from Bank of Botswana reflect a declining appetite for household credit, indicating restrained growth in personal incomes. Furthermore, the March financial statistics shows that deposits held by banks continue to decline due to the prevailing lower interest rates.

Total deposits held by commercial banks decreased from P63.3 billion in January to P62 billion in February. This is after deposits of residents businesses decreased by 0.6 percent to P46.4 billion. The resident business category, made up of private businesses and parastatals, registered declines in deposits from private businesses and parastatals which retreated by 0.5 percent and 2.1 percent respectively. Furthermore, total deposits took a dip when deposits held by the local government tanked by 19.4 percent to P2.5 billion.

The decline in total deposits held by commercial banks was cushioned by slight increases in deposits held by households which advanced by 2.8 percent to P 13 billion.

The latest data shows that businesses continue to hold the most deposits as they account for 74.6 percent of total deposits compared to 20.8 percent for households.

The March financial data which covers the first two months of the year show that the sluggish credit growth was largely driven by non-residents. Total credit extended by commercial banks increased by P112 million to P51.6 billion in February, up by 0.2 percent from the previous month. There was an uptake of credit in the non-resident businesses, advancing by 10.5 percent to P86.5 million. Loans to resident businesses increased by 0.4 percent to P21 billion. This was despite a 1.6 percent fall in credit held by parastatals. The biggest holder of debts, households, eased on credit as it slightly increased 0.1 percent to bring its debts to P33 billion.

Commercial banks credit growth for 12 months ending February was 4.9 percent, same as the previous month. The share of credit to the household sector was 61.1 percent, down from 61.2 percent in the previous month.

Outstanding bank of Botswana certificates (BoBCs) at market value decreased by 5.6 percent to P7.5 billion in February. The financial statistics for the first two months of year shows that in February, the foreign exchange reserves increased by 3.1 percent to P76 billion. Based on changes in the reserves, adjusted for unrealized gains and losses, the balance of payments was in an overall surplus by P2.4 billion.

“The increase reflects, among others, foreign exchange inflows, resulting from SACU receipts, dividends and royalties payments by Debswana and Diamond Trading Company Botswana (DTCB). The increase is also, to a lesser extent, due to market revaluation gains and interest payments,” said Bank of Botswana.

At the end of March 2018, the pula appreciated against the rand by 0.4 percent, while firming against the dollar by 0.1 percent. The pula weakened against the pound sterling by 1.3 percent, also losing ground against the euro by 0.8 percent and depreciated against Japanese yen and Chinese renminbi by 0.4 percent and 0.7 percent, respectively. In the twelve months to March, the pula continued to strengthen against the greenback by 10.4 percent, while also appreciating against the Japanese Yen by 5.3, and the Chinese renminbi by 0.7 percent. However the pula depreciated against the euro by 4.3 percent, also down by 3.4 percent against the rand and 2.2 percent against the pound.


Read this week's paper