Sunday, July 25, 2021

Pula depreciates against Rand

The local currency – Pula depreciated by 0.9 percent against its South African counterpart – the Rand over the one-month period to February 2021.

Data from the central bank – Bank of Botswana shows that during the same period, the local currency appreciated by 0.3 percent against the IMF Special Drawing Rights (SDR).

A further breakdown of the figures shows that the Pula recorded a mixed performance against the SDR constituent currencies. It appreciated by 2.1 percent against the Japanese yen and 0.5 percent against both the US dollar and the Chinese yuan, while it depreciated by 1.3 percent against British pound, and remained relatively stable against the euro.  

The Bank of Botswana says over the twelve months period to February 2021, the nominal Pula exchange rate depreciated against both the South African Rand and the SDR by 2 percent and 3 percent, respectively. Against the SDR constituent currencies, the Pula depreciated by 7.9 percent against the Euro, 6 percent against the British Pound, 5.9 percent against the Chinese Yuan and 0.7 percent against the Japanese Yen, while it appreciated by 1.8 percent against the US Dollar.

The Government adjusted the downward rate of crawl of the Pula exchange from 1.51 percent to 2.87 percent per annum, in May 2020. The Pula basket weights were maintained at 45 percent for the South African Rand and 55 percent for the IMF’s Special Drawing Right for the duration of 2020.

Finance and Economic Development Minister – Dr Thapelo Matsheka said in February that after a review of May 2020 exchange rate parameters, a decision was taken to maintain them for 2021.  

“The objective of our exchange rate policy is to support the competitiveness of domestic firms in both domestic and international markets, as well as to provide an adjustment mechanism to shocks and long-term structural economic changes”, Dr Matsheka said.

The combination of the rate of crawl and Botswana’s lower inflation rate compared to the average of trading partners’ inflation during the year meant that the Real Effective Exchange Rate (REER) depreciated by 1.5 percent in the twelve months to November 2020. The depreciation of the REER suggests that some gains could be made in Botswana’s export competitiveness, which may contribute to economic growth and employment creation.

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