Gov’t seeks to raise P1.6bn

BoB holds its August auction Low inflation expected to boost participation at the auction gross financing requirement for FY23/24 is P7.59 billion Represented by the Bank of Botswana (BoB), the government aims to raise P1.6 billion through the local debt market at the August auction, up from the P1.2 billion that was on offer in July and P800 million in June, the Business Weekly & Review has established. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="3" ] BoB will hold its monthly auction of Government Notes under its P30 billion Note Programme tomorrow (Friday). According to RMB, on offer at this auction will be P900 million in T-bills split equally in 3 and 6-month tenors, as well as P700 million in government bonds spread through 4-year (P300 million), 8-year (P300 million) and 17-year (P200 million) tenors. Borrowing strategy Botswana’s borrowing strategy, as highlighted by the Ministry of Finance, shows that the gross financing requirement for FY23/24 is P7.59 billion, and will be financed by bond sales of P5.0 billion and a net treasury bill issuance of some P879 million. According to RMB, any shortfalls could be raised through competitively-priced foreign borrowings. The investment bank says Botswana’s headline inflation has been on a downward trend since the turn of the year, printing within the central bank’s 3 percent – 6 percent objective for the third consecutive month. This is expected to boost participation at the upcoming auction. Domestic inflation In the July auction, RMB notes that there was a sharp drop in the yields of T-bills, with the 6-month yield dropping by 59bp from 6.685 percent to 6.091 percent, while the 12-month T-bill came out at 6.011 percent, 61bp lower from the previous auction. BoB’s Monetary Policy Committee (MPC) convened today (Thursday) and maintained the Policy Rate at 2.65 percent. It projects domestic inflation to remain below the lower bound of the central bank’s objective range of 3 – 6 percent temporarily. This is little surprising in that Statistics Botswana’s recently availed figures show that the annual inflation rate was 1.5 percent in July 2023, compared to 4.6 percent in June 2023, registering a drop of 3.1 percentage points. The central bank expects inflation to drop to 1.2 percent in August. The major contributors to the annual inflation rate in July 2023 were Transport (-2.0 percentage points), Food & Non-Alcoholic Beverages (1.4 percentage points) and Miscellaneous Goods & Services (0.8 of a percentage point). International food prices The contribution of -2.0 percentage points by the Transport group applied a downward movement on the July 2023 annual inflation rate. Briefing the media on the outcomes of the MPC meeting today, BoB governor Moses Pelaelo said inflation is expected to revert within the objective range from the first quarter of 2024 into the medium term. “The projected low inflation is due to, among others, subdued domestic demand and the downward revision in the recent forecast of international food prices and trading partner countries inflation,” Pelaelo explained. “The risks to this inflation trajectory were assessed to be balanced.” He said the MPC has observed that inflation could be higher than projected if international commodity prices increase beyond the current forecast, supply and logistical constraints persist, and the reversal of global economic integration gains pace. GDP growth “Furthermore, any possible upward adjustment in administered prices that is not factored in the current projection may lead to higher inflation,” he cautioned. “However, inflation could be lower than anticipated because of the possibility of weaker domestic and global economic activity, possible disinflationary effects of higher monetary policy rates globally, stronger-than-anticipated appreciation of the Pula against the South African Rand, and restrained international commodity prices.” Economic transformation reforms Meanwhile, Botswana’s real GDP increased by 5.8 percent in 2022, lower than the 11.9 percent recorded in 2021. The Ministry of Finance projects GDP to grow by 3.8 percent and 4.4 percent in 2023 and 2024, respectively. Pelaelo told journalists that the MPC acknowledges the growth-enhancing economic transformation reforms and supportive macroeconomic policies being implemented. “These include accommodative monetary conditions, improvement in water and electricity supply, implementation of the Economic Recovery and Transformation Plan and the two-year Transitional National Development Plan,” he said. Other efforts that are being put in place include reforms to further improve the business environment, such as promulgation of the Credit Information Act and the Movable Property Act, both of which Pelaelo said have the potential to make credit more accessible. New deal with De Beers “In addition, the recent announcement of an agreement in principle between the Government of Botswana and De Beers Group on a new Debswana Mining Licence and new Sales Agreement is expected to be positive for medium-term growth,” he noted. The BoB governor said in addition to the dissipating impact of increases in administered prices in 2022, the domestic economy is expected to operate below full capacity in the short term and is therefore unlikely to generate demand-driven inflationary pressures. However, inflation is forecast to be within the objective range in the medium term and closer to the upper bound. Due to these factors, the MPC maintained the Monetary Policy Rate (MoPR) at 2.65 percent. [/ihc-hide-content]

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Gov’t seeks to raise P1.6bn

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