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
Don't let FMD outbreak drag on

Acting Agriculture Minister, Edwin Dikoloti, is right in saying opening an export-ready facility whilst Foot and Mouth Disease (FMD) is still spreading would risk getting the whole country blacklisted before a single carcass leaves the door.A ban like that would break the already stressed nation. So, the postponement, painful as it is, is the right thing to do. The local economy is being squeezed from both ends. FMD has already slammed the door...

Have a Story? Send Us a tip
arrow up