Foreign reserves decline

14th February 2017
money Source:The Midweek Sun


By Portia Nkani - Reporter

Botswana’s foreign exchange reserves stood at P76.8 billion at the end of December 2016, compared to P84.9 billion in December 2015, representing a decline of 9.5 percent.

Finance and Economic Development minister, Kenneth Matambo said this on Monday as he delivered the budget for the financial year 2017/18.  He said the preliminary balance of payments projections for 2016 point to a surplus of P5 billion, compared to a deficit of P57 million recorded in 2015. The significantly larger surplus in 2016 is mainly due to a positive current account balance.

“The current account balance is projected to record a larger surplus of P25.7 billion in 2016, compared to P10.5 billion in 2015, underpinned by the anticipated trade balance surplus. Exports are expected to have grown by 21 percent, while imports are expected to decrease by 9 percent in 2016, mainly as a result of the slight recovery in the diamond market and continued depression of the domestic demand for imports,” Matambo revealed. 

In the 2016/17 budget delivery, the preliminary overall balance of payments for 2015 were estimated at P3.3 billion as at November 2015, a decrease from P11.4 billion recorded in 2014. The current account surplus was estimated to fall from P22.9 billion in 2014 to P12.9 billion in 2015.

In terms of the US dollar and the Special Drawing Rights (SDR), Matambo this week said these reserves stood at US$7.2 billion and SDR5.3 billion, respectively. The fall in reserves is attributable to an increase in demand for foreign exchange to pay for imports, notably for imported electricity by Botswana Power Corporation.

These levels of reserves are equivalent to 17 months of import cover of goods and services. The Government Investment Account (GIA) portion of the foreign exchange reserves also declined from P35.5 billion in December 2015 to P33.3 billion in November 2016, due to increased payments for imports relative to export receipts during the period.

The Minister had in his previous deliveries emphasised that, while this portion of the reserves is available for government use, it is important that the use of these reserves is restricted to investment in high impact projects. These are projects with potential to bolster economic growth, and thus, contribute to future budget surpluses needed to re-build depleted reserves.

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