Friday, July 19, 2024

Pula weakens against Rand, gains against key currencies

The country’s currency, Pula, saw a 4.5 percent decline against the South African rand and a 1 percent rise against the IMF Special Drawing Rights (SDR) over the twelve months to May 2024, according to the latest data from the central bank. The Pula also strengthened 13.1 percent against the Japanese yen, 2.6 percent against the Chinese renminbi, and 0.5 percent against the US dollar, while weakening by 2.1 percent against the British pound and 0.7 percent against the euro.

In the one-month period leading to May 2024, the Pula appreciated 0.4 percent against the South African rand but fell 0.6 percent against the SDR. It also depreciated 1.6 percent against the British pound, 1.3 percent against the euro, and 0.1 percent each against the US dollar, Japanese yen, and Chinese renminbi.

A majority of firms across several sectors, including mining, retail, accommodation, transport, manufacturing, construction, real estate, and finance, expressed dissatisfaction with the Pula exchange rate during the first quarter of 2024, according to the Bank of Botswana’s latest Business Expectations Survey (BES).

The BES, conducted quarterly by the central bank, assesses business sentiment regarding current economic conditions and future outlooks. The survey, which sampled 100 businesses across 13 economic sectors, focuses on anticipated changes in key indicators and their impact on businesses.

The Bank of Botswana noted that firms in the surveyed sectors rely heavily on raw material imports from South Africa, making them favor a stronger Pula against the rand to mitigate import costs.

Over the past month, the Pula depreciated 1.1 percent against the South African rand, contrasted by a 0.7 percent appreciation against the SDR. Notable gains were observed against other major currencies, including a 1.5 percent rise against the Japanese yen and a 1.1 percent increase against the Chinese renminbi. There were modest gains against the British pound, euro, and US dollar.

Businesses also pointed to supply constraints due to geopolitical conflicts and new citizen economic empowerment policies as significant operational challenges in Botswana.

Despite these challenges, positive factors such as adequate water and electricity supply, political stability, a robust regulatory framework, government spending, skilled labor availability, external financing, and domestic and international demand were identified as supportive of business operations in Botswana during the first quarter of 2024.

The survey indicates a decline in business optimism compared to the previous quarter. However, the Bank of Botswana projects an improvement in business conditions for the second quarter of 2024 and the twelve-month period leading to March 2025, driven by expected enhancements in employment opportunities and business investment.

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