Sunday, March 7, 2021

Khama approves Matambo’s request to maintain Pula exchange rate

Bank of Botswana has confirmed that President Ian Khama, acting on its advice, has approved the request by the Finance and Development Planning Minister, Kenneth Matambo, to maintain the rate of crawl of the local currency, the Pula and the weight of the currencies in the basket.

The decision, which was made this week, means the Government will maintain the existing parameters of the crawling band exchange rate mechanism during the whole of this year.

The Pula basket comprises 55 percent South African rand and 45 percent Special Drawing Right, while the rate of crawl is minus 0.16 percent per annum.

Last year the government disclosed both the rate of crawl of the Pula and the weight of the currencies in the basket after close to a decade of non-disclosure.

The move, according to economic commentators, was made in a bid to foster transparency of Botswana’s exchange rate mechanism.

The Central Bank said in statement circulated late Friday that, “the parameters of the crawling band exchange rate mechanism for 2013 are being maintained, as they have continued to contribute to the stability of the Real Effective Exchange Rate, which is critical for economic diversification and job creation.”

Meanwhile data from the central bank shows that this week, The Pula gained traction against most of its major trading counterparts but retreated against the rand.

The local unit shed 0.7 percent against the rand but firmed by 0.8 percent and 1.8 percent to the dollar and the pound respectively.

Still last week, the bank’s Monetary Policy Committee (MPC) announced its decision of maintaining the bank rate at 7.5 percent.

Since the beginning of 2013, BOB cut its rate four times by 50 basis points (0.50 percent) each time in May, June, August and lately in mid this month. Overall, this reduced the Bank rate to 7.5 percent from 9.5 percent since the previous rate cut in December 2010.

“The current state of the economy and both the domestic and external economic outlook, as well as the inflation forecast, suggest that the current monetary policy stance is consistent with maintaining inflation within the Bank’s 3-6 percent objective in the medium term. Accordingly, the Monetary Policy Committee decided to maintain the Bank Rate at 7.5 percent,” reads a statement from BOB released on Friday.

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