8th May 2023
The local currency, the pula appreciated by 1.5% against the South African rand and depreciated by 1.4% against the IMF Special Drawing Rights (SDR) over the one-month period to April 2023.
The latest data will be appreciated by firms in the Mining and Quarrying, Manufacturing, Construction as well as Real Estate sectors who have previously viewed the Pula/Rand exchange rate as unfavourable.
In a survey carried out by the central bank in the last quarter of 2022, most firms in these sectors shared the view that it has been costly to do business in Botswana as the Pula was not strong enough against the South African Rand.
The central bank suggested in the survey that the sentiment might be justified by the fact that, “…..these firms source most of their raw materials from South Africa”.
The latest data shared by Bank of Botswana shows that during the month of April 2023 the pula was run 2.3% down by the euro, 1.9% by the British pound, 1.2%, 0.4% by the US dollar and 0.4% against Chinese renminbi. The local currency came in strong against the Japanese yen appreciating by 0.5%.
The Bank of Botswana data shows that over the 12-month period to April 2023, the nominal Pula exchange rate appreciated by 5.9% against the South African rand and depreciated by 8.7% against the SDR. Against the SDR constituent currencies, the Pula depreciated by 12.2% against the euro, 8.3% against the US dollar, 7.9% against the British pound, 4.8% against the Japanese yen and 4.1% against the Chinese renminbi.
With domestic inflation expected to be, on average 1.51% higher than in the trading partner countries in 2023, the ministry of finance and the central bank late last year opted for a 1.51% annual downward crawl for the Pula.
It is anticipated that the crawl rate will be implemented through small daily adjustments that would equal 1.51% over 12 months. Government economists also came to a conclusion that the trade patterns remain largely unchanged and, therefore, maintained the weight at 55% DR and 45% South African rand.
The exchange rate of a currency measures how much one currency can be bought for each unit of another currency or, put differently, the rate at which domestic currency can be converted into a foreign currency or vice versa. Botswana adopted and has to date, been implementing a crawling peg exchange rate policy framework since 2005. Under the framework, the Pula is fixed to a basket of foreign currencies, namely the Special Drawing Rights (SDR) and the South African Rand. The SDR comprises the US dollar, British pound, euro, Japanese yen and Chinese renminbi.
Source: https://www.sundaystandard.info/the-pula-reigns-on-the-rand-again/
