The Cost of the Weaker Pula Against the US Dollar

Portfolio Manager at Kgori Capital, Kwabena Antwi, says Botswana’s high import bill currently does not have an impact on the country’s liquidity. “Based on September 2022 trade statistics, Botswana is a net importer of goods, if we exclude diamond activity,” Antwi said in an interview. “On a rolling 12-month basis, Botswana has a trade deficit of P58 billion if we exclude the contribution of the diamond trade.” [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="1" ] However, he noted, if the diamond trade is factored in, Botswana has a trade surplus of P1.4 billion on a rolling 12-month basis. “Diamond exports have thus cushioned the country from its rising import bill,” he explained. Botswana imports mainly fuel, followed by foodstuffs and beverages. According to August trade statistics, Botswana received imports worth P5.9 billion with fuel accounting for P1.7 billion of that amount or 25 percent of the total. Conversely, in the same month, the country exported commodities worth P10.7 billion, mostly diamonds at 88.8 percent or P9.5 billion of the total amount of exports. Diamonds were followed by copper with a contribution of P437 million. According to Antwi, a key component in the determination of local fuel prices is the price of crude oil on the international market, which is priced in the USD. “Therefore, substantial depreciation (appreciation) of the USD against the Pula would result in lower (higher) local fuel prices, if all else is held constant,” he said. He noted that the rising fuel prices, along with increasing global food prices, will automatically increase Botswana’s import bill. “Botswana is a net importer of food, hence an increase in global food prices will eventually result in higher local food prices,” Antwi pointed out. In the last 12 months to October 2022, the Pula has depreciated by a total of 15.2 percent against the USD. Chief Economist at Alexforbes, Isaah Mhlanga, has noted that currencies are depreciating in many markets due to a stronger USD on the back of rising interest rates in the US and that the USD is expected to remain stronger until year-end. “This means most African currencies will remain weaker into the year-end,” said Mhlanga at a recent media briefing. “It also means the cost of importing goods remains high for countries such as Botswana, particularly for energy prices.” Food import bill According to figures from Statistics Botswana, Botswana has spent a staggering P7.8 billion on importation of foodstuffs for the first seven months of this year. Cereals mostly alternate with beverages, spirits, and vinegar for the most imported food items monthly. For instance, in January, the country’s food import bill stood at P845.7 million with cereals accounting for 22.4 percent of total food imports or P189.7 million. In the same month, beverages, spirits, and vinegar accounted for 19.2 percent or P162.1 million of the total food import bill. The most imported items under this category were waters, including mineral waters and aerated waters in sealed containers. The waters were followed by other beer made from malt, with an alcohol content of five percent or less, and other non-alcoholic, not including fruit or vegetable juices. In February, Botswana’s food import bill amounted to P861 million with beverages, spirits, and vinegar the most imported food items, which all together contributed P163.1 million or 18.9 percent. For this month, cereals came second in the most imported food items with a P155 million contribution or 18 percent. June was the month in which the country recorded the highest amount of food imports at P2.3 billion, higher than the March value of P1.3 billion. In June, sugars, and sugar confectionery were the most imported types of food, contributing P1.1 billion or 48.6 percent of the food import bill for that particular month. Among the category of sugars and sugar confectionery, the most imported types were sucrose, chemically pure, in solid form, and not containing added flavouring or colouring matter. Regarding cereals, the most imported commodity during this month was wheat and muslin, other than durum wheat, other than seed, and maize (corn), other than seed. While data for some months last year is missing, available figures indicate that the country spent P5 billion in food imports, which is the amount for six months only. The highest amount spent on food imports last year was P995.7 million, which was almost a P1 billion in October. [/ihc-hide-content]

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The Cost of the Weaker Pula Against the US Dollar

While the strength of the US Dollar against the Botswana Pula is felt in the rising cost of imports, observers say diamond exports have cushioned the country’s import bill, hence little effect of the Dollar-Pula differential on the country’s liquidity

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The Cost of the Weaker Pula Against the US Dollar

While the strength of the US Dollar against the Botswana Pula is felt in the rising cost of imports, observers say diamond exports have cushioned the country’s import bill, hence little effect of the Dollar-Pula differential on the country’s liquidity

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