On account of higher exports, Botswana’s gross foreign reserves have, according to the African Development Bank, “remained substantial and stood at USD 8.09 billion as at end July 2013 – equivalent to 13 months of imports.”
The country’s annual rate of inflation continued on the downward trend recorded since the end of the second quarter and declined from 5.8 percent in June 2013 from 5.6 percent in August 2013.
“For the third consecutive month, inflation remained within the Bank of Botswana’s objective target range of 3-6 percent. The lower inflation mainly reflects declines in food and transport prices. The recent decline in inflation has prompted the Bank of Botswana to start relaxing the tight monetary policy by reducing its lending rate from the 9.5 percent that had been in force since December 2010 to 9 percent in April 2013 and further to 8.5 and 8.0 percent in June and August, respectively. The reduction in inflation is expected to continue in the short term as fuel and food prices stabilize and a further relaxation in the monetary policy may be considered,” says the AfDB report which gives an overview and analysis of SADC economies and was released last Friday.
With regard to fiscal policy, Botswana’s medium-term budget remains focused on fiscal sustainability and the promotion of economic growth. The estimated outturn for the last quarter of financial year 2012/13 (January-March 2013) indicates a surplus of P790 million (about 2.0 percent of GDP). AfDB notes that this is a “remarkable turnaround” given that in the corresponding quarter of the 2011/12 financial year, Botswana recorded a deficit of P3 693 million – about 14.1 percent of GDP.
“The surplus reflects an increase of 45 percent in revenue and a decline in expenditure of 3.5 percent. The increase in revenue mainly arose from substantially high non-mineral income tax revenues, VAT and customs collections while the decline in expenditure reflected a decrease in recurrent expenditure that counteracted an increase in development expenditure. The 2013/14 budget takes into account the challenges emanating from the persistent uncertainty in the global economy and the associated adverse effect on revenues and forecasts only a modest budget surplus of 0.6 percent of GDP,” says the report adding that public debt is projected to decline to 13.5 percent of GDP in 2013/14 from 14.9 percent in 2012/13.
Some 10.2 percent of the latter figure will be external public debt – including publicly guaranteed debt.
During the second quarter of 2013, Botswana realized a trade deficit of P 2 657 million, which was an improvement from a deficit of P3 090 million recorded in a similar period of 2012. While exports increased by 44 percent, the impact was counteracted by a 31 percent increase in imports. The increase in exports was mainly due to mineral products, particularly diamonds, which increased by 50 percent.
“The recovery in diamond exports signals renewed prospects for the economy although it remains to be seen whether this can be sustained in view of the continuing persistent fragile global economic prospects,” the report says.
During the period under review, the nominal value of the pula exhibited mixed performance against major foreign currencies during the third quarter of 2013. The pula held steady against the US dollar and the yen while it depreciated against the pound sterling by 5.7 percent and against the euro by 3.3 percent. However, it appreciated against the rand by 2.2 percent.