Bank of Botswana (BoB) data published yesterday pegged the Pula Fund at P41.99 billion in February, about eight percent higher than the P38.84 billion it was left at after the drawdown last September.The Pula Fund is a sovereign wealth fund comprising both national savings built from historical budget surpluses and mineral revenues as well as foreign reserves in excess of the country's medium-term requirements.
Since 1994, the BoB has invested the Pula Fund across various asset classes in international markets, keeping to guidelines emphasising safety over returns.Figures published yesterday indicate that the Pula Fund has continued its slow recovery since the drawdown, gaining P179 million between January and February. Between December 2012 and January 2013, the Fund gained P2.5 billion representing the biggest monthly jump since the drawdown.
The latest BoB data also indicates that the Government Investment Account (GIA) has strengthened since its fall to P17.7 billion at last September's drawdown. The GIA, which is invested as part of the Pula Fund, holds the proceeds of government's accumulated budget surpluses and net borrowing.
BoB figures show that the GIA strengthened to P20.6 billion in October, before peaking at P21.3 billion in January.In February, the Account was pegged at P19.8 billion.The latest figures mirror the healthier trade data seen over the past six months in data published by both the BoB and Statistics Botswana.The figures included an estimated balance of payments surplus of P2.3 billion for January, a rare trade surplus of P361.2 million declared in February and robust Botswana-produced rough diamond exports of P5.8 billion for the first quarter.
The improvements in the GIA however, come as experts caution that the current levels of national savings are insufficient to cater for future generations.In a recent report, two Econsult experts cited findings from a 2008 IMF "that in order to provide a future income of just over six percent of GDP through to 2050, as a replacement for mineral revenues, government would have to accumulate savings equivalent to 90 percent of GDP by 2023".
At present, the GIA is equivalent to 15 percent of forecast nominal 2013/14 GDP of P130 billion.
"Between 1983/4 and 2011/12, the government received an estimated P334 billion (at 2010 prices) in mineral revenues, but had saved only P3 billion of this in financial assets - net of debt - by the end of 2011," Keith Jefferis and Thabelo Nemaorani wrote."Of course, some of the revenues have been invested well, in human capital and economic and social infrastructure.
"But it would seem prudent to have at least retained a significant portion of this income in the form of financial assets, for a 'rainy day' if not for coming generations." The GIA represents government's savings account, which can be drawn upon in the event of budget deficits, while the Pula Fund represents a source of foreign currency that can be drawn upon in the event of balance of payments deficits.
The local economy has experienced rolling balance of payments and budget deficits since the global recession in 2009, forcing government to dip heavily into both the GIA and the Pula Fund.