Ratings vital for policy formulation - Matambo

KEIKANTSE LESEMELA
Correspondent | Thursday July 12, 2012 00:00

 

He revealed that Botswana subscribes to the world's foremost credit rating agencies, Moody's Investors Service (Moody's) and Standards and Poor's (S & P). He said government pays US$128,800 (P977,000) in total annual fees to the two agencies.'The annual subscriptions paid by Botswana ensure that the country is reviewed on an annual basis to enable us to measure the country's competitiveness and formulate policies that would assist Botswana to attract foreign direct investment,' he said.Botswana has consistently been awarded the highest ratings in Africa for its strong financial position and sound macro economic policies.

Information from Bank of Botswana states that Botswana's 2011 sovereign credit rating by both Moody's and Standards and Poor's retained the A2 rating for both foreign and domestic bonds, revising the outlook upwards from negative to stable.Matambo was responding to a question from Palapye Member of Parliament Moisiraele Goya who wanted to know whether countries apply to be assessed by credit rating agencies, and if they pay subscription fees. He further wanted to know the fees countries pay to be assessed.

Goya also wanted to know how a country or company that feels it has been unfairly rated or disadvantaged by the rating can seek remedial action.Matambo said there is very little scope for remedial action unless it can be shown that the regulations that guide the activities of the agencies, or any other legal provision, have been violated to the disadvantage of the rated country or company.

'It is vital for the credibility of the process that the credit rating agencies provide an independent and objective opinion of the creditworthiness of rated sovereigns or entities. In this regard, the US Securities and Exchange Commission (SEC) introduced regulations to ensure that an arms-length relationship between the rating agencies and their clients is maintained,' he said.During the credit crunch  in 2009, Botswana's rating remained in the A grade ranking, the best in Africa. The A2 rating was supported by Botswana's sound policy framework, strong government effectiveness, and the long-term approach to prudent management of national finances with a view to long-term economic and social development, says Moody's.