Bond trading in Botswana has experienced a remarkable surge, more than doubling since the beginning of the year, data published by Botswana Stock Exchange (BSE) shows. The local bourse says the growth in bonds trading is largely attributed to a significant 175.1 percent increase in government bond trading, which now constitutes 82.3 percent of the bond market’s total capitalisation.
As of the end of July, the number of listed debt instruments in Botswana has reached 134. This total includes 7 government bonds, 96 corporate bonds, 31 commercial papers, and one sustainable bond. The surge in trading activity follows a pivotal policy decision by the Finance Ministry in March 2024 which resulted in a rise in the ceiling for the Government Bond Issuance Programme from P30 billion to P55 billion.
Established in March 2003 under the Stocks, Bonds, and Treasury Bills Act, the Government Bond Issuance Programme has evolved to adapt to the changing dynamics of the financial market. Following liquidity challenges and pricing constraints identified in a comprehensive review of the programme in 2019, significant reforms were introduced in September 2020. These reforms included increasing the bond issuance limit to P30 billion, enhancing market transparency, and launching innovative debt instruments such as Inflation Linked Bonds (ILBs).
Data from BSE shows that the recent surge in bond trading activity extends beyond government bonds to include a growing interest in corporate bonds, reflecting an expanding investor appetite for diverse debt instruments. Corporate bond trading has also seen a substantial rise, with transactions more than tripling compared to the same period in 2023.
However, while the growth in bond trading is promising, it also raises potential concerns regarding its impact on private sector investment. The dominance of government securities in the market could crowd out private sector funding, presenting challenges to economic growth and development.
