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BoB slammed for its silence on global recession

Staff Writer
The Bank of Botswana (BoB) has been heavily criticised for its silence over the state of the country's foreign exchange reserves in view of the unfolding global financial crisis that has seen markets crumble over the past 10 months.

Outspoken University of Botswana lecturer, Dr Oupa Tsheko, has described the central bank's silence as "sheer arrogance" because the public deserves to know the status of the country's wealth.

Speaking at a panel discussion on the effects of the global financial crisis on Botswana at UB recently, Tsheko said the central bank's silence left researchers and analysts to merely speculate.

Though the Bank of Botswana was invited, it did not attend.

"The central bank and pension fund managers owe the nation an explanation (regarding) the state of the funds invested in international markets," Tsheko said.

 "In as much as we want to believe that our reserves are invested in a diversified portfolio, we still want to know how much has been lost in equity markets and how much is in bond markets because I understand even the bonds have somewhat been affected.
"The last time I checked, Lehman Brothers (which has collapsed into bankruptcy) was one of the managers of our reserves and we deserve to know all this. The central bank is not the owner of that money, they are supposed to be managers of it."

Lehman Brothers has collapsed alongside AIG, Bear Stearns, Merrill Lynch and others. Business Today has been trying to get a comment from BoB about the state of the country's forex reserves for over a month without success.

 At the time of going to press, BoB's Public Relations Officer, Chepete Chepete, had still not responded to a Business Today questionnaire sent to him when Lehman Brothers collapsed five weeks ago.

"The question now is: Is our small country safe given the fact that it is very much an open economy which relies on trade?,"Tsheko mused aloud.

"Initially, South Africans were claiming that they were not going to be affected by the turmoil, but look at what has happened to the rand now!

"We need the Ministry of Finance, the central bank and asset managers to come out in the open and tell us what is

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going on. I also understand that even though pension funds are relatively safe as they are mainly long-term investments, people retiring in the near future will have their funds affected. People close to retirement need an explanation."

Botswana's forex reserves are estimated at P65 billion while pensions funds stand at approximately P35 billion.

Said economic consultant Keith Jefferis, who was also a panellist, in response to a question on the safety of Botswana's forex reserves: "I would say nothing is safe in this environment."

"Although I am certain that the foreign exchange reserves have taken a knock, I do not, however, think that they have been affected to the extent they should make us panic at this stage.

"The reserves are invested around the world and in a wide range of assets that include equities, but the bulk of reserves are invested in bonds.

So I believe the risk is minimal at the moment because firstly, only a small proportion is invested in the risky equities markets and secondly, the losses are likely to be compensated by the firming of the bond market.

"We should also bear in mind that the reserves represent a long-term asset of the economy, which we are not going to call upon in the near future. Eventually, as the markets recover, the value of these assets will be restored."

Regarding pension funds, Jefferis said unlike foreign exchange, about 30 percent of pensions funds were invested locally, which somewhat reduced the risk as local markets had barely been affected by the global turmoil.

However, he was quick to point out that because a proportion of the funds were invested in international equity markets, their values were likely to have been compromised.

"So yes, if I was retiring tomorrow, I would not be happy as the value of my funds would have gone down," he said. "But if I was to retire in the next five or ten years, I would not be particularly worried."



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