GABORONE, Jan. 5 (Xinhua) — Botswana is planning to allow a 1.51 percent depreciation of its currency until December 2024 to counter inflation, the finance minister has announced.
The depreciation against a basket of Special Drawing Rights (SDR) currencies and the South African rand has been necessitated by the expectations that local inflation will be elevated by more than price growth in the economies of Botswana’s trading partners, Minister of Finance Peggy Serame told an annual meeting of the Botswanan Treasury with the business community based in Francistown, Botswana’s second-largest city, Thursday.
“It is a reflection of weak production capacity and productivity of the economy,” she said.
According to the International Monetary Fund (IMF), the SDR is an interest-bearing international reserve asset created by the IMF in 1969 to supplement other reserve assets of member countries. The SDR is based on a basket of international currencies comprising the U.S. dollar, the Japanese yen, the euro, the British pound sterling, and the Chinese renminbi.
Serame said the South African rand, although not categorized as an SDR currency, will be impacted by the depreciation of the Botswanan pula because South Africa is one of Botswana’s major trading partners.
Botswana’s exchange rate policy, or the mechanism to determine the value of the pula, has since 2005 followed a crawling peg framework in which the currency is fixed to a basket of the SDR and the rand, she said.
