Botswana's trade balance expected to rebound

MBONGENI MGUNI
Staff Writer | Friday March 26, 2010 00:00

According to the CSO, Botswana's imports for 2009 amounted to P33.3 billion while exports for the year amounted to P24 billion, resulting in an overall deficit of P9.3 billion.

In comparison, the trade deficit for 2008 was P2.5 billion. The 2009 deficit is largely due to the contraction of prime export industries such as diamond mining, textiles, copper/nickel and beef, due to the collapse of target markets in the grip of the global recession.

This week, banking experts said Botswana's trade balance was expected to rebound to healthier pre-recession levels this year and beyond, powered by overall improvements in the industrial and monetary environment.

First National Bank of Botswana's Head of Wholesale Banking, Boiki Tema, said there were expectations that the country would soon emerge from its trade deficits.

'The global financial crisis has left countries all over the world picking up the pieces of their respective economies as they endeavour to get back to pre-crisis levels,' Tema said.

'Once the dust has officially settled and the financial debris cleared, some will find themselves rebounding faster than others. Botswana expects one such rebound.'

He said several factors supported a rebound in Botswana's trade balance: 'The Bank of Botswana has kept lending rates stable at 10 percent, after a spate of monetary policy easing in 2009, with six rate cuts totalling 550 basis points.

'Based on inflation differentials and the significance of the strong Rand in Botswana's currency basket, the Pula is expected to weaken somewhat in 2010. This will have a net positive effect on exports. Mining production - in particular diamond exports - is expected to recover, which will largely contribute to the anticipated growth trajectory.'

Tema added that trade between Botswana and its neighbours was also expected to grow, bringing opportunities for local companies and entrepreneurs.

Standard Bank Group Limited economist, Jan Duvenage, had a less optimistic forecast for Botswana's trade balance, saying imports of consumer and capital goods - the latter linked to investment in infrastructure - was likely to outweigh diamond exports this year.

'We expect that export growth will start to improve in 2011 and 2012, if the US diamond market recovers,' Devenage said. 'A robust growth in the US and a resumption of strong consumer demand for luxury goods are prerequisites for a sustained improvement in the diamond market.

'Consumer confidence in the US remains at depressed levels, suggesting that consumers are pessimistic about their income prospects.'

He added that with receipts from the Southern African Customs Union expected to be lower on slow South African growth, Botswana's current account would suffer, with a trade deficit of six percent of Gross Domestic Product projected for 2010.

First National Bank's International Banking Training Manager, Chris Coker, said Botswana would remain competitive in international trade, despite the challenges it faced in the short-term.

'The country is stable and it still has the resources,' Coker said. 'The strength of the Pula can also be an advantage or a disadvantage, depending on whether you are looking at the value of imports or exports.

'Also, the country has a large amount of coal under development and forecasts are that Chinese demand is growing, even though the US and European economies are taking a bashing.'

Economic tacticians in the Ministry of Finance and Development Planning as well as at the Bank of Botswana are hoping that the prevailing low interest rates will support export recovery, while the relatively low international price of crude oil will reduce the price of imports.

Petrol and distillate fuel are the country's major imports, accounting for approximately 11.5 percent of monthly imports.