Botswana plans to permit a 1.51% depreciation of its currency against a basket of other currencies in 2024, as it expects that local inflation will surpass price growth in the economies of its trading partners.
- Botswana plans to permit a 1.51% depreciation of its currency against a basket of other currencies in 2024.
- The need for a downward adjustment in the pula "is a reflection of weak production capacity and productivity of the economy.
- The country is recognized as one of the ten best African nations for investment.
The annual downward crawl, akin to last year's rate, will occur through minor daily adjustments that would equal 1.51% over the year until December, as stated by the Finance Ministry in a Thursday announcement, Bloomberg reported.
The Treasury had previously targeted a 2.87% depreciation of the local currency in 2021 (compared to 1.51% in 2020) to enhance the country's export competitiveness, but it believes further measures are necessary.
According to the minister, the need for a downward adjustment in the pula "is a reflection of weak production capacity and productivity of the economy,"
"It is also inflationary, ultimately affecting price competitiveness," he added
The pula is pegged to a basket of foreign currencies, with the South African rand accounting for 45%, and the remainder consisting of International Monetary Fund reserves known as special drawing rights (SDRs).
SDRs include the US dollar, British pound, euro, yen, and renminbi. Botswana then applies an annual crawl rate to the currency.
Gaborone, Botswana, ranks among the top ten African cities with the highest purchasing power. Additionally, the country is recognized as one of the ten best African nations for investment.
The country has high foreign exchange reserves, which have enabled it to weather the pandemic-induced economic storm better than most. The Pula Fund, a sovereign fund created in 1994 that finances a large part of the budget deficit, has meant that fiscal dependency on a debt has been low.
Source of the article: Business Insider Africa