Botswana has been warned that it needs to improve balances in the Government Investment Account in a bid to prep for any disaster similar to global economic recession in 2008 or events bigger than that.
Currently, the country’s debt position is favourable on the back of improvements in government’s balances at the Central Bank. However, Finance Minister, Kenneth Matambo advised during presentation of the budget speech for financial year 2015/2016, that the economy needs to decrease its debt, which rose marginally in the recent past.
“We expect our net position to continue to improve further by the end of the current and coming financial years,” said the former Managing Director of Botswana Development Corporation (BDC).
“However, we need to decrease our net debt and increase our balances in the Government Investment Account, if we are to be in a position to absorb a major external shock of the magnitude we experienced in financial years 2008/2009 and 2009/2010”.
Matambo told parliament that as at the end of March 2014, government’s net financial assets stood at 1.7 percent of GDP, an improvement from the negative 6.9 percent of GDP in March 2013.
“This was because government’s balances at Bank of Botswana had risen from P20.61 billion to P31.75 billion over the 2013/14 financial year, while net debt and guarantees increased only marginally over the same period, from P28.33 billion to P29.52 billion,” explained Matambo.
The minister also told the house that by the end of December 2014, the foreign exchange reserves amounted to P79.0 billion, equivalent to 18 months of import cover of goods and services, which was an increase of 16.5 percent from P67.8 billion in December 2013.
“The increase in the foreign exchange reserves reflects mainly the net foreign exchange inflows and the exchange rate movements between the Pula and other major international currencies.”
Botswana’s foreign exchange reserves declined at the height of the recession as demand for the economy’s goods fell abroadÔÇöespecially in the United States which remains the largest consumer of Debswana products.