10th July 2025
Sello Motseta
Bank of Botswana(BOB) has revised its current annual downward rate of crawl from 1.51% to 2.76% with a view to supporting local manufacturers and service providers operating in external markets thereby bolstering country’s potential export earnings avoiding further depletion of foreign reserves.
It has also increased the threshold for foreign currency trading with the commercial banks from US$1 million to US$5million.
The primary idea is to make it more expensive for local banks to borrow from the Bank of Botswana and so encourage commercial banks to exchange money amongst themselves and avoid depleting Botswana’s foreign exchange reserves.
“We have increased the Pula trading margin between the buy and sell rates for currencies quoted by the Bank of Botswana from +/- 0.5% around the central rate to a margin of +/- 7.5%. This is intended to preserve foreign exchange reserves and promote the development of an interbank foreign exchange market, thereby moderating the reliance of commercial banks on the Bank of Botswana for foreign currency trade(purchases and sales),” said Dr Kealeboga Masalila, Deputy Governor of the Bank of Botswana(BOB).
He said, “We will also maintain the prevailing Pula currency basket weights of 50% for the South African rand and 50% for the SDR. This should continue to moderate the votality of the Pula against any individual currency with the larger singular weight with respect to the South African rand helping to promote the competitiveness of domestic goods and services in the South African market, a close and important trading partner.”
According to officials there is subdued economic activity as indicated by GDP contraction in both 2024 and 2025. There has also been a sharp decline in mining especially diamonds output and low growth rates in the non mining sector, underscoring continued reliance on mining for overall economic growth and a general lack of diversification and productivity in other sectors.
Another worrying tendency that central bank officials reportedly felt needed to be arrested urgently was the significant decrease in country’s foreign exchange reserves mainly due to much lower export earnings while the demand for imports remained high.
Commercial banks and other entities were also holding a considerable amount of foreign currency.
“It remains crucial to address structural issues and policy implementation constraints that hinder productivity, accelerated economic diversification and desirable higher rates of inclusive economic growth. It is evident that a concerted effort is required from the Government and its agencies, the private sector and households to implement policies and actions that will safeguard the overall resilience of the domestic economy,” said Masalila.
