Botswana’s Financial Stability Committee (FSC) has expressed optimism about Botswana’s economic recovery and ability to withstand challenges experienced by the financial sector.
The FSC met on 27 April and 10 May 2021 to discuss Botswana’s financial sector which has been besieged by a plethora of challenges such as overreliance of the economy on external sectors and the government, a narrow economic base/lack of diversification, and the continual listing of Botswana by the European Union over anti-money laundering compliance deficiencies.
But despite these challenges, the FSC is confident that policy support offered by the Botswana Government will see the economy through. “The FSC observed that this was against the background of, first, prospects for economic recovery supported by the marked improvement in global market sentiment, the rollout of the COVID -19 vaccine and ongoing policy support, locally, the Economic Recovery and Transformation Plan, as well as accommodative monetary policy,” the FSC said in a press release.
It noted that Botswana has maintained a stable macroeconomic environment. “The financial system continues to be resilient, despite the adverse effects of COVID-19, characterised by strong capital and liquidity buffers, and remains profitable, adaptive and innovative,” it said.
It observed that financial risks that could sink the already ailing economy have thus far been well contained. It said commercial bank credit growth and corporate leverage remains moderate, meaning there is adequate market liquidity in Botswana. “The economy is projected to grow by 8.8 percent in 2021, involving recovery of several sectors and, therefore, positive for financial sector performance,” it noted.
However, the FSC said the risks associated with the structure of the economy and the COVID -19 virus that has collapsed economies remains. In view of this, it is warned that if not dealt with, the country’s fiscal position could be compromised, which may result in a decline in exports and by extension weaken the financial sector.
“The FSC noted the following prospective projects: the revision of the Non-Bank Financial Institutions Regulatory Authority Act and the Financial Intelligence Act, as well as the drafting of the Credit Information Bill and the Secured Transaction on Movable Property Bill (which will provide for the establishment of the Collateral Registry),” the press release said regarding regulation.
“The FSC further observed that FMIs (namely payment systems, central securities depository and securities settlement systems) remain stable and resilient, thus strengthening and preserving domestic financial stability. In addition, the domestic supervisory authorities continue to embrace financial technologies through policy support for market developments and regulatory adaptation to ensure orderly business conduct, consumer protection and maintenance of financial system integrity.”
It noted that another issue of “great concern” to the financial sector stability is the Anti-Money laundering/Combating the Financing of Terrorism/Counter Proliferation Financing (AML/CFT/CPF), which has resulted in Botswana being greylisted and blacklisted by international financial institutions.
Currently Botswana remains on the grey list of the Financial Action Task Force (FATF) but continues to make progress in rectifying its defects. “The FSC observed that Botswana remains on the Financial Action Task Force list of jurisdictions with strategic AML/CFT deficiencies and accordingly that the authorities continue to implement the required action plans.”
Launched in 2019, FSC is made up of senior financial experts from the Ministry of Finance and Economic Development (MFED), NBFIRA, the Bank of Botswana (BoB) and Financial Intelligence Agency (FIA).