Inflation Persuades Botswana To Weaken Currency By 1.51% In 2024

The government of Botswana has today, 28 December 2023, announced that it will allow the country's currency, the pula, to weaken by 1.51% against its basket. The pula's basket includes the South African rand and SDR (special drawing rights) which comprise 45% and 55% of the pula's value respectively. 

Special drawing rights are an international type of monetary reserve currency created by the International Monetary Fund (IMF) in 1969. It operates as a supplement to the existing money reserves of member countries which Botswana is.

For 2024, it was determined by the Ministry of Finance and Bank of Botswana that inflation in Botswana would be on average 1.51% higher than in the trading partner countries and, therefore, a 1.51% annual downward crawl would be implemented through small daily adjustments that would equal 1.51% over twelve months. 

In a press release, the government explained that the reason for allowing the weakening of the currency is because it projects inflation in the country to be higher than the growth in prices of the country's trading partners. Botswana will thus seek to take advantage of these "favourable inflation differentials". According to the Bank of Botswana, the need for a downward adjustment of the crawl is a reflection of weak production capacity and productivity of the economy; and is also inflationary (ultimately affecting price competitiveness).

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