Mmegi

Falling reserves raise fears of pula framework change

Under pressure: The foreign exchange reserves ‘defend’ the pula PIC: MORERI SEJAKGOMO
Under pressure: The foreign exchange reserves ‘defend’ the pula PIC: MORERI SEJAKGOMO

Market watchers have warned that the country may be forced to adjust the crawling peg, the current exchange rate system used to manage the pula, as foreign reserves continue to plummet due to the prolonged diamond downturn.

The countries foreign exchange reserves reached $3.5 billion in April in comparison to record highs of $10.3 billion in 2008. This steep downfall has meant that the country’s fiscal planners have less wiggle room to sell the pula and buy other currencies in an attempt to defend the value of the pula and maintain constant supply of foreign currency to banks and traders.

In their second quarter economic review, researchers at Econsult, a local firm led by prominent economist Keith Jefferis, warned that the trajectory of the foreign reserves suggested a review of the crawling peg system that is currently being used to give the pula nominal value.

Editor's Comment
FMD crisis: We must fight as one

That should concern every Motswana. The implications extend far beyond cattle and farmers. Botswana’s beef industry is a critical pillar of the economy, supporting thousands of households and sustaining businesses along the value chain.The loss of access to lucrative export markets has already demonstrated how quickly an animal-health crisis can become an economic crisis.This is, therefore, not the time for complacency, blame, or political...

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