Foreign Reserves Slide Again

MBONGENI MGUNI
Staff Writer | Monday March 1, 2010 00:00

From highs of P72.2 billion in October 2008 - just before the recession - the country's foreign reserves sank to P55.3 billion last May, continuing a pattern of general decline averaging one billion Pula per month during that period. The deterioration in foreign reserves was mainly as a result of government digging deep to finance the P13.5 billion deficit, which was part of a fiscal decision to speed the country's way out of the recession.

During the process, foreign reserves took a hard knock as reflected by Bank of Botswana statistics unveiled last Friday. According to the data, foreign reserves improved from September to October last year, reaching P61.5 billion

However, the reserves declined in November 2009 to P60.9 billion and the Bank of Botswana gave an unaudited estimate of P59 billion for January 2010 as foreign reserves.

The two-month jump in the third quarter of last year is partly attributed to improving mineral exports, including the P28.7 million netted by African Copper from its first sale of copper concentrate in August.

Despite the January set back, analysts expect the country's foreign reserves to start climbing again as its economic mainstay, mining, pulls itself back from the recession. The country's diamond exports hit P1.3 billion for December 2009, compared to P1.5 billion for January, February and March 2009. In addition, the Diamond Trading Company Botswana (DTCB) has begun raising the prices of rough, indicating the gradual recovery of the diamond market. Other minerals such as copper and nickel are enjoying higher prices on the global market.

In addition, government's bail-out package for the textile industry is expected to result in the sector's return to being the country's prime non-mining export commodity.

For the third quarter of 2009, the textile sector recorded P388.3 million in export sales, which is lower than the trend per quarter in the last four years. Beef, the second largest non-mining export commodity, is also expected to rebound this year due to the Botswana Meat Commission's various incentives to producers.