Botswana set to devalue its own currency




Gaborone, Botswana

Botswana has set its pula currency to lose value at a faster rate this year, a senior official said Monday, as it seeks to boost export competitiveness after the COVID-19 pandemic has had a deep impact on diamond sales that are central to its economy.

In the biggest shift for many years, the government has set the pula to lose 2.87% this year from 1.51% in 2020. Already in 2020, the rate marked a big change from previous years when the adjustment was less than one percent.

Botswana uses a crawling band exchange rate regime under which the pula is pegged to a basket of currencies, including the South African rand.

Its value is adjusted upwards or downwards at the beginning of each year using a rate of crawl that factors in the inflation differential between Botswana and major trading partners.

The currency basket was kept at 45% to the rand and 55% to the IMF’s special drawing right currencies.

International diamond sales, which make up 80% of Botswana’s exports, had just begun to recover from a weak 2019 when the COVID-19 pandemic knocked them back again.

Source – Reuters