Wednesday, October 21, 2020

Foreign reserves increase due to high exports and govt cash balances

The depreciation of the Pula against most currencies in which the reserves are held has contributed to an increase in foreign reserves in Pula terms, says the Bank of Botswana. The Reserve Bank also said subdued global economic performance and slow growth in the major economies continue to fuel uncertainty in global economic prospects. Low interest rate environments have also moderated earnings on bonds while returns on holdings of shares were relatively better.

This was revealed by BoB Director Monetary and Financial Stability, Dr Kealeboga Masalila, when presenting the bank’s financial operations, together with economic developments for 2013, on Monday. He pointed out that the high level of exports compared to imports, together with increase in government cash balances, added to the foreign exchange reserves. He added that the bank’s operating costs were lower in 2013 because of reduced interest expense.

“There has been moderate growth for most players in the non-mining sector in 2013. Positive contributors include finance, business services, trade, hotel, construction and transport and communication,” he said.

Dr Masalila said there was weak performance in the manufacturing and agriculture, water and electricity sectors. However, he revealed that there was positive sentiment about prospects for the world economy, which is a positive for Botswana. The BoB generated net income of P7 billion in 2013 which was higher than the P5.5 billion for 2012. Dr Masalila said this reflects a return which meant higher value of foreign reserves. BoB generated net income of P1.6 billion in 2013 which is available for distribution after P5.4 billion was transferred to the currency revaluation reserve.

The reserve bank paid P1.6 billion into the government investment account, down from P2.9 billion in 2012. This comprised of P500 million pre-set dividend, P430.8 million excess over pre-set dividend and P666 million as residual income. Last year, the bank paid P1.1 billion interest on foreign reserves, while P1.2billion was paid in 2012.

“The country also experienced an increase in exports of diamond, beef, copper and nickel and a decrease in textiles after government halted its support for the textile sector,” said Dr Masalila.

In 2013, BoB incurred an interest cost of P396 million, down from P551 million in 2012. Assets increased from P59.8 billion in 2012 to P68.6 billion in 2013. The BoB certificates fell from P8.7 billion in 2012 to P5.5 billion in 2013. Dr Masalila said there was faster economic growth attributable to the mining sector while inflation fell in within the medium term 3-6 percent objective range. He added that monetary policy eased in 2013, coupled with some fall in liquidity and increase in conversion of deposits to loans.

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