Monday, July 15, 2024

Pula appreciates 1.8% against Rand

The central bank has said that the local currency, the Pula, appreciated by 1.8 percent against the South African rand and depreciated by 1.9 percent against the IMF Special Drawing Rights (SDR) over the one-month period to September 2022. The local unit also depreciated by 4.2 percent against the US dollar, 0.6 percent against the euro and 0.1 percent against the Chinese renminbi, while it appreciated by 3.8 percent against the British pound and remained relatively stable against the Japanese yen.

Over the twelve months period to September 2022, the nominal Pula exchange rate appreciated by 1.1 percent against the South African rand and depreciated by 5.9 percent against the SDR. Against the SDR constituent currencies, the Pula depreciated by 15.5 percent against the US dollar and 5.9 percent against the Chinese renminbi, while it appreciated by 9.8 percent against the Japanese yen, 6.3 percent against the British pound and 2.3 percent against the euro.

The Exchange Rate worries

A Business Expectation Survey carried by the Bank of Botswana for the second quarter of 2022 showed that some firms in the Construction, Manufacturing and Mining and Quarrying sectors, expressed views that the South African Rand/Botswana Pula exchange rate was, “unfavourable and therefore costly to doing business in instances where the Pula weakened against the South African Rand.”

The central bank says that the exchange rate view was predicated on the fact that the respondent companies source most of their raw materials from neighbouring South Africa.

In its annual report (2021), the Bank of Botswana also stated that its exchange rate policy supports competitiveness of domestic industries in international and domestic markets, by maintaining a stable real effective exchange rate (REER) of the Pula against a basket of currencies of major trading partner countries.

In 2021, the weights of the Pula basket currencies were maintained at 45 percent and 55 percent for the South African rand and the SDR, respectively. “Consistent with the policy objective of maintaining a stable REER of the Pula, a downward rate of crawl of 2.87 percent for the nominal effective exchange rate (NEER) was implemented in 2021,” reads part of the BoB 2021 annual report.

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