The Pula is expected to hold steady against the Rand for the remainder of the year, Central Bank deputy-governor, Oduetse Motshidisi, has said.
The pula hit the near parity levels with the South African rand during the fourth quarter of 2010 prompting theorists in the financial sector to think that Botswana produced goods will stand a better chance to compete with those from Africa’s biggest economy.
The pula was trading in the margins of 1.03 cent ÔÇôto ÔÇô 1.05 cents to the Rand during the last quarter of the year. And on Friday, it was trading at 1.0487 cent to the Rand.
The Rand constitutes 64 percent in the pula currency while the rest is made up of the United States dollar, British Pound sterling, Japanese Yen and SDR.
“It appears the Pula / Rand exchange rate has stabilized. The Rand is not likely to appreciate (against the pula) as it continues into the year,” he said during the unveiling of the 2011, Monetary Policy Statement.
Some of the key elements of the monetary statement are to set stable and predictable exchange rate system and inflationary objectives. However, BoB indicated that the inflationary objective of three-to- six percent would not be achieved this year owning to the rising fuel and food prices.
The Rand appreciation over in the past year was sparked by the rise in commodity pricesÔÇöespecially gold. South Africa is the world’s biggest gold producer and benefitted immensely on the back of gold price spike.
Further, South Africa, which is part of the emerging markets, saw great inflows of foreign investments who were wary of the prevailing economic condition in the mature markets of the westÔÇöespecially the debt ridden European countries.
The latest exchange rates are the lowest since the country adopted the crawling peg some four years ago. The crawling peg is a system that automatically adjusts the pula exchange rates within a certain band against its trading partners.
Analysts pointed out that the weakening of the Pula against the Rand should help in the diversification of the economy and import substitution.
Botswana’s economy is dominated by the mineral sector, mainly diamonds.