Tuesday, May 11, 2021

Credit Suisse confirms Botswana’s declining debt levels

Having reached a high of $764 per adult in 2011, debt levels among Batswana have been dropping.
According to figures from Credit Suisse, the first spike in household debt in the past seven years came in 2007 when it rose from $340 per adult to $604.

In the same period, wealth per adult had also risen from $8803 in 2006 to $16 205. In 2008 when the global economic recession set in, debt per adult dipped to $510 and was at its lowest in 2009 when it plummeted to $488. The following year it rose to $570 before dramatically shooting up to $764. It has been declining since: in 2012 it was $728 and in 2013 it was $693.

In the not-too-distant past, both the Bank of Botswana (BoB) and the International Monetary Fund have expressed grave concern about high household debt levels. In one of its reports, the latter warned that commercial banks’ level of exposure to this debt was a significant source of vulnerability that could jeopardise overall performance and warranted close monitoring.
However, in its latest Banking Supervision Report, BoB notes some improvement. It says that lending to the household sector constituted 57.9 percent of total loans and advances, a slight decline from 58.1 percent in 2012. The Bank’s 2014 annual report says that saving and borrowing decisions of households and resilience of the household sector are important for overall soundness and stability of commercial banks and the broader financial sector.

“This is in the context of the potential for households to act as reliable and stable source of funds while unsustainable household debt can endanger the sustainability of the financial sector,” says the report, adding in another part that households participate in the financial system through their pool of savings (bank deposits) and other financial assets (pension funds and ownership of shares and other securities). “Such savings provide a sufficient pool of resources (intermediated through the financial system) for businesses and government to undertake investment in support of growth in production, employment and incomes.”

Credit Suisse’s debt series on Botswana goes back to the end of 2000 when debt per adult was only $113. It rose steadily to $160 in 2002 and in the following year, continued its ascent by more than 100 percent to reach $267. In 2004 it rose farther to $344, then dipped to $309 the following year. Credit Suisse’s most recent global wealth report says that the richest 1 percent of the world’s population own more than 48 percent of global wealth. It warns that growing inequality could be a trigger for recession.

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