Finance Minister Ndaba Gaolathe has strongly defended the recent adjustments to Botswana’s Pula exchange rate policy, describing them as “a bitter but necessary medicine” to shield the country from potential economic collapse.
Speaking in Parliament on July 23, Gaolathe acknowledged that the policy shift had unsettled many citizens, but said the government was acting to preserve Botswana’s financial stability in the face of declining foreign reserves and weakening diamond exports.
“I understand the discomfort, the questions, and most importantly I understand the fears,” Gaolathe said. “These are not abstract and theoretical concepts—they directly affect everyday essentials such as groceries, fuel, and other basic needs. But this policy is not about sacrifice for its own sake. It is a shield against collapse.”
The changes, which took effect on July 11, 2025, include increasing the annual rate of crawl from -1.51% to -2.76%, widening the trading margins between the Pula and other currencies from ±0.5% to ±7.5%, and maintaining a 50:50 currency basket of the South African Rand and IMF Special Drawing Rights.
Gaolathe explained that the overvaluation of the Pula—by 5% to 10%—had become unsustainable in the current economic climate, particularly as diamond revenues fell.
“When the Pula remains overvalued, the Bank of Botswana is forced to dip into foreign reserves to support its value,” he said. “This was eating into our savings, and at the rate we were going, we risked running out.”
Botswana’s foreign reserves have been under pressure. The minister revealed that in 2024 alone, the Bank of Botswana sold foreign currency equivalent to P56.6 billion to commercial banks—an average of P1.2 billion per week. Following the recent adjustments, commercial bank purchases have dropped dramatically to around P290 million per week.
“This decline is a positive development,” Gaolathe said. “It shows that commercial banks are increasingly sourcing foreign currency through market-based channels instead of relying on the central bank. That reduces pressure on our reserves and enhances the sustainability of our market.”
He rejected claims that the changes weakened the Pula’s strength or status.
“The Pula remains a strong store of value and medium of exchange,” he said. “What we have done is bring it closer to its true value, and this makes our exports more competitive.”
The minister also cited global examples to warn of the risks of inaction, pointing to Sri Lanka’s economic collapse in 2022 after its reserves ran dry due to delayed reforms.
“I do not have the luxury of presiding over a booming economy,” Gaolathe said. “I carry this burden not with fear, but with the courage to do what is right—even when it is not easy.”
The minister highlighted that the new measures are designed not only to stabilise the economy but also to stimulate domestic production. By making imports more expensive, he argued, the adjustments could promote local sourcing and industrialisation.
“This is about creating more jobs for our youth, supporting local businesses, and building an economy less vulnerable to global shocks,” he added.
To support the structural reforms, Gaolathe pointed to the recently launched Botswana Economic Transformation Programme (BETP), which he said is focused on shifting Botswana from an import-reliant economy to an export-oriented and innovation-driven one.
The minister further praised the Competition and Consumer Authority for warning businesses against unjustified price hikes linked to the exchange rate change.
“Let me be clear,” Gaolathe said, “These adjustments do not justify the levels of price increases some businesses have introduced. The authorities are watching and will act where necessary.”
He concluded with a call for understanding and cooperation from citizens, stating that the adjustments would be reviewed in December 2025.
“This is a proactive measure to avert a far more severe crisis,” Gaolathe said. “It is about protecting the vulnerable and securing a better future for all Batswana.”
