Exchange rate policy provides the framework for determining the external value of the national currency of Botswana, the Pula. As set out in the Bank of Botswana Act (Cap 55:01, section 21), decisions relating to this framework are made by the President of Botswana on the recommendation of the Minister of Finance and Economic Development after consultation with the Bank. The Bank then implements the exchange rate policy on behalf of the Botswana Government.
Botswana’s Exchange Rate Policy
Botswana’s exchange rate policy is aimed at maintaining the level of competitiveness of local producers of tradeable goods and services in both international and domestic markets. By extension, the policy supports the national objective of economic diversification, together with the associated industrial development and employment creation objectives. The Pula exchange rate, therefore, is determined on the basis of a peg to a basket of currencies, the choice of which is guided by the trade pattern and currencies used in international trade and payments. It is pegged to a trade-weighted basket of currencies that comprise the South African rand and the International Monetary Fund’s unit of account, the Special Drawing Rights (SDR). Pegging to a basket of currencies rather than a single currency means that movements in the Pula exchange rate are not subject to an extreme influence of exceptional volatility of any single currency.
An important goal of the exchange rate policy is the stabilisation of the real effective exchange rate (REER) in relation to Botswana’s main trading partners. While movements in bilateral exchange rates are important, the policy focus has been on the composite trade-weighted effective exchange rate, with a desire to attain a stable REER. In line with this objective, the authorities closely monitor the relative inflation performance between Botswana and her trading partners.
Through its history since the introduction of the Pula in 1976, exchange rate policy in Botswana has undergone several major changes, with the current framework introduced in May 2005. Basics of exchange rate policy provides users with explanations of major concepts and essential terminology.
- History of exchange rate policy in Botswana
- Current framework
- Basics of exchange rate policy
The statistics section of the website also included a wide range of exchange rate-related data, including an interactive search facility that allows users to list and graph the value the Pula against major currencies for selected periods.