In a significant financial development, Minister of Finance Peggy Serame has inked a pivotal agreement between Botswana and the International Bank for Reconstruction and Development (IBRD).
Under this agreement, the IBRD, the World Bank’s lending arm, is set to provide a substantial loan amounting to USD 150 million (approximately P2 billion) to the government of Botswana.
It was revealed at the signing ceremony that the loan will finance Phase II of the Botswana Programmatic Economic Resilience and Green Recovery Programme; supporting the government’s response to multiple shocks; strengthening private sector development; and promoting a resilient, Low-carbon recovery.
The terms of the agreement of the loan indicate that it would be repaid over a 10-year period, which includes a 3-year grace period. It will have a Front-end Fee of 0.25 percent, a commitment charge of 0.25 percent on the unwithdrawn balance and a variable rate of interest based on a benchmark Reference Rate and a variable spread.
The signing of the agreement comes after the government wrote a letter to the two international financial institutions seeking about P2 billion to help the economy cope with the effects of COVID-19. After the approval of the loan by the International Bank for Reconstruction and Development, the government had to obtain final approval from Parliament.
“The objective of the Bill is to authorise the raising by the government of a loan of an amount not exceeding US $150 000,000 from the International Bank for Reconstruction and Development,” the minister said when explaining the Economic Recovery Support (Loan Authorisation) Bill 2023, earlier in Parliament.
She said the purpose of the loan is to support the government’s response to multiple shocks, strengthening private sector development and promoting a resilient, low carbon recovery.
She said the proceeds of the loan authorised by “this act shall be paid into the Development Fund” and that all sums required to pay the loan and other charges on the loan shall be charged and paid out of the Consolidated Fund. Serame had also presented to Parliament “a paper containing a report on the loan which shall include the terms and conditions of the loan and any other information relating to the loan that the minister considers appropriate to include”.
Serame said the P2 billion loan from the International Bank for Reconstruction and Development (IBRD) would support the country’s budget deficit. The minister said, a budget deficit of P7.59 billion was projected for the financial year 2023/24 and that it would be financed through a combination of domestic and external borrowing.