Tuesday, October 19, 2021

Govt parastatals do not extend much of a borrowing hand

Botswana’s State Owned Entities (SOEs) continue to borrow less from the private sector, executives at the central bank, Bank of Botswana, have revealed. 

Led by the governor, Moses Pelaelo, the BoB executives, most of whom sit in the bank’s Monetary Policy Committee (MPC) told financial journalists at a press conference in the capital Gaborone that of late there has been less activity when it comes to government parastatals reaching out for credit from the commercial banks. 

The BoB officials went on to share statistics that showed that by end of February 2017, there was a 25.4 percent contraction in parastatals borrowing compared to 19.4 percent recorded during the same period in 2016. 

Pelaelo went on to say that although the desire is to see all firms including parastatals borrowing money from the private sector, there are a number of factors that are at play that has resulted in the current scenario where records show a contraction in credit from commercial banks to parastatals. 

According to Pelaelo, there has been a significant increase on reliance of government funding by some of the parastatals. He, however, said that one available option for SOEs is the bond market which he said could provide funding for long term projects in the country. 

“These parastatals should be able to go out and source funds from the debt market rather than just relying on government funding”, Pelaelo told Sunday Standard on the sidelines of the MPC press conference. 

Still on credit, BoB said that following the closure of the BCL Mine in Selebi Phikwe, the banks had also incurred high impairments with a significant growth of 5.4 percent in February 2017 from 4.9 percent in December 2016. As results, some banks are said to have exercised caution when dealing with employees of some SOEs. 

Meanwhile, the MPC said that in its second meeting of the year, which was held on Friday morning, a decision was taken to maintain the Bank Rate at 5.5 percent. 

“The outlook for price stability remains positive as inflation, although increasing slightly in the short-term is forecast to remain within the 3ÔÇô6 percent objective range in the medium term,” noted Pelaelo on Friday. 

He further said that the current state of the economy and the outlook for both the domestic and external economic activity suggest that the prevailing supportive monetary policy stance remains consistent with maintaining inflation within the Bank’s medium-term objective range of 3 – 6 percent. The next MPC meeting is scheduled for June 20, 2017. 

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