Background Information
The foreign exchange reserves are assets held by the Bank of Botswana in foreign currencies. The reserves are accumulated mainly through surpluses on the balance of payments together with increases to the value of existing foreign currency investments. It is important for Botswana to maintain adequate foreign exchange reserves to be able to meet the demand for foreign currency to pay for imports of goods and services on an ongoing basis, as well as meet other international payment obligations, including the costs of servicing international debt.
Adequate reserves are furthermore required to support a managed exchange rate, as with the crawling peg that is the basis for the exchange rate policy in Botswana. The level of reserves fluctuates on a daily basis due to the Bank’s foreign currency transactions (purchases and sales) with both the Botswana Government and the domestic banks.
Recent Performance
The value of the reserves in both domestic and foreign currency terms (US dollar and SDR) is reported regularly in the Bank’s monthly and annual financial statements as well as in the Botswana Economic and Financial Statistics (Tables 3.4 and 6.7).
By international standards, Botswana has accumulated significant reserves when measured relative to the total imports of goods and services by a country. This is due to a combination of a sustained period of balance of payments surpluses and prudent management of the foreign exchange reserves.
As of June 30, 2023, the level of foreign exchange reserves amounted to P66.1 billion, an increase of 18.3 percent compared to P55.9 billion at the end of the first quarter of 2023. The increase was mainly due to receipts of funds from diamond sales, share of revenues from Southern African Customs Union (SACU) and the depreciation of the Pula against the USD during the quarter under review.
Total months of import cover provided by the official foreign exchange reserves as at the end of the second quarter of 2023 was 9.1. Relative to international norms, the country’s foreign exchange reserves and months of import cover are adequate; to accomplish the principal objectives of the Bank, and to finance international transactions of the country, as envisaged under Sections 32 to 35 of the Bank of Botswana Act (CAP 55:01).