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Business and Economics > Finance: General

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Cover IMF Staff Country Reports
Botswana: 2024 Article IV Consultation-Press Release and Staff Report
International Monetary Fund. African Dept.
The 2024 Article IV Consultation discusses that Botswana’s economic growth is expected to slow to 1 percent in 2024 primarily because of a diamond market contraction, before picking up next year. Inflation has declined sharply since the peak of mid-2022 and returned to the central bank’s medium-term objective range of 3–6 percent, where it is expected to remain in the medium term. Some fiscal relaxation is warranted this year given the fall in mineral revenues, but the ambitious capital budget should be streamlined to contain the deterioration of the deficit and prioritize projects with the highest value for money. The monetary policy stance is appropriate, but monetary policy transmission remains limited, requiring further deepening of the interbank, credit, and government bond markets along the transmission chain. Reducing inequality and unemployment requires a more job-intensive, private sector-led, and export-oriented growth model. Reform of state-owned enterprises, improved infrastructure for doing business (internet, energy, and logistics), trade facilitation measures, and a more efficient social protection system should be prioritized.
Keywords:
IMF's article; OPEC Fund for International Development; project obligations to fund; objective range; diamond market contraction; IMF team; Non-renewable resources; Financial sector stability; Global; Southern Africa; Africa
Cover IMF Working Papers
Central Banks and Climate Change: Key Legal Issues
Mario Tamez
,
Hans Weenink
, and
Akihiro Yoshinaga
Well-designed legal frameworks and institutional arrangments support the legitimacy of central banks’ autonomous decision-making when grounded on sound legal basis and can prevent over-stepping in the remit of other authorities. This paper explores the key legal intersections of climate change and central banks. Climate change could impact price and finanical stability, which are at the core of a central bank’s mandate. While central banks’ legal frameworks can support climate change efforts they also determine the boundaries of the measures they can adopt. Central banks need to assess their mandate and authority under their current legal frameworks when considering measures to contribute to the global response to climate change, while taking actions to fulfill their legal mandates.
Keywords:
Climate Change; Central Bank; Legal Framework; central bank development programs; autonomous decision-making; IMF working paper No. 24/192; central bank's mandate; core objective; Financial sector stability; Climate policy; Central bank mandate; Central bank legislation; Global
Cover IMF Working Papers
Understanding Barriers to Financial Access: Insights from Bank Pricing Data
Kazuko Shirono
,
Berhe Beyene
,
Fozan Fareed
,
Christiaan Loots
,
Andrea Quevedo
, and
Kameshnee Naidoo
Greater availability of financial access related data in recent years is increasingly enabling policymakers to better track and monitor financial access trends and developments. However, data on barriers to financial access, including costs associated with using financial services—a key factor of financial exclusion—remain scarce. To gain insight into the costs of financial access faced by the low-income segments of population, this paper presents an analysis of a novel dataset on bank pricing containing information on fees and charges associated with various banking services—collected as part of the United Nations Capital Development Fund’s (UNCDF) Making Access Possible (MAP) program—based on a market research approach for 34 low- and middle-income countries in the ASEAN, SADC, and WAEMU regions. The results of our affordability analysis reveal that the costs of maintaining a bank checking account and conducting a few basic transactions can exceed 5 percent of monthly income for consumers in more than 10 percent of the countries in the sample, mainly in the WAEMU and SADC regions. These findings underscore the considerable challenge of affordability as a significant barrier to access to financial services, especially for low-income households and SMEs. The analysis also highlights the need to collect more granular data on the affordability aspect of financial access to facilitate more effective policymaking.
Keywords:
Financial access; affordability; bank pricing; financial inclusion; bank pricing datum; small business bank products usage; bank checking account; cost of banking services; banking product; Income; Mobile banking; Small and medium enterprises; Africa
Cover IMF Staff Country Reports
Botswana: Financial Sector Assessment Program-Technical Note on Systemic Liquidity Management
International Monetary Fund. Monetary and Capital Markets Department
This paper presents a technical note on Systemic Liquidity Management in Botswana. The liquidity management framework of the Bank of Botswana (BoB) has been strengthened since the April 2022 monetary policy reforms; however, structural excess liquidity and its volatility persist. The BoB’s liquidity regulations could more effectively facilitate banks’ ability to manage liquidity internally. Although banks maintain liquid assets above the regulatory minimum, these may be insufficient to withstand a high funding liquidity risk. Further support for an effective framework for banks’ liquidity management can emanate from streamlining the BoB’s collateral framework for refinancing facilities. The absence of a framework for emergency liquidity assistance leaves a gap for managing systemic liquidity shocks and should be addressed as a priority. Promoting the development of interbank repo market and government securities market helps to increase financial sector resilience. The existing interbank market is a fragmented unsecured market comprised of one-way lending from large banks to small banks, which is an important but insufficient shock absorber for liquidity risk.
Keywords:
B. liquidity management framework; B. emergency liquidity; risk control measure; liquidity vulnerability; liquidity risk; Liquidity risk; Liquidity; Liquidity requirements; Collateral; Commercial banks
Cover IMF Staff Country Reports
Botswana: Financial Sector Assessment Program-Technical Note on Assessment of Systemic Risks and Vulnerabilities for Banks
International Monetary Fund. Monetary and Capital Markets Department
This technical note discusses assessment of systemic risks and vulnerabilities for banks in Botswana. The systemic risk analysis was conducted in the aftermath of the coronavirus disease 2019 pandemic. The assessment is based on stress tests, which simulate the health of the banks under a severe yet plausible adverse scenario. The scenario includes global and domestic inflationary pressures, monetary policy tightness, and a major slowdown of economic activity. The exercises covered eight commercial banks as of June 2022. Three types of stress test exercises were performed: a top-down solvency stress test, a liquidity stress test, and a contagion and interconnectedness stress test. The latter focused on the domestic banking interconnectedness. The financial system appears resilient to a wide range of shocks. Solvency stress tests identify small capital shortfalls in two banks under the adverse scenario. The Financial Sector Assessment Program recommends that the Bank of Botswana introduces macro and micro level stress test based on a multiperiod scenario analysis and develops its framework to assess interest rate risk in the banking book.
Keywords:
solvency stress test result; banking system asset decomposition; LCR sensitivity analysis; bank solvency stress test; I. NPL ratios satellite model; Liquidity requirements; Commercial banks; Stress testing; Loans; Nonperforming loans; Global
Cover IMF Staff Country Reports
Botswana: Financial Sector Assessment Program-Technical Note on Financial Sector Safety Nets, Crisis Management, and Bank Resolution Framework
International Monetary Fund. Monetary and Capital Markets Department
This technical note highlights financial sector safety nets (FSN), crisis management, and bank resolution framework in Botswana. The financial safety net framework in Botswana is incomplete, while crisis preparedness and management structures must be expanded. The authorities are, however, poised to significantly improve the FSN and Crisis Management framework. Implementing a suitable law for the Deposit Insurance Scheme of Botswana and preparing the action plan for its operationalization, including clear funding arrangements through bank contributions and a public backstop, are needed. Developing the safety nets that characterize good international practices in the financial regulatory architecture will require the Financial Stability Council (FSC) to prioritize work over the near- to medium-term. The FSC should be expanded to include a crisis preparedness and management mandate, which is in line with its statutory responsibilities outlined in the Bank of Botswana Amendment Act, 2022. The FSC would oversee high-level monitoring of the financial system, analyzing the risks affecting the system, and discussing the appropriate policies to mitigate those risks. The FSC should also formally introduce system-wide crisis management protocols to plan and implement solutions in the event of a crisis.
Keywords:
core principle; International Monetary Fund publication service; bank recovery plan outline; bank of Botswana amendment Act; BoB power; D. deposit insurance; bank supervision department; Crisis management; Bank resolution; Bank resolution framework; Crisis prevention; Lender of last resort; Global
Cover IMF Staff Country Reports
Botswana: Financial Sector Assessment Program-Detailed Assessment of Observance—Basel Core Principles for Effective Banking Supervision
International Monetary Fund. Monetary and Capital Markets Department
This paper presents Botswana’s Detailed Assessment of Observance—Basel Core Principles for Effective Banking Supervision report. Legislative changes for safeguarding operational independence are needed. The supervisory methodology and bank-rating framework requires a review to be a forward-looking assessment of risk. The supervision approach can be strengthened with greater use of qualitative information as inputs for offsite analysis together with a shorter onsite examination cycle. The capital adequacy framework for banks is largely aligned with the Basel framework and proportionate to the risks and complexities of the local banking industry, with minimum capital requirements being set significantly higher than under the Basel framework. The supervisory approach to management of problem assets, provisions and reserves by banks needs revision. There is a need to develop guidance for supervisors and supervisory methodologies to encourage higher standards of liquidity risk management. Material deficiencies exist in relation to regulations for corporate governance.
Keywords:
IMF-World Bank Financial Sector Assessment Program; Botswana accountancy oversight authority; banking supervision department; amendment Act; asset liability management committee; Market risk; Credit risk; Bank risk management; Operational risk; Liquidity risk; Global
Cover IMF Staff Country Reports
Botswana: Financial System Stability Assessment
International Monetary Fund. Monetary and Capital Markets Department
This paper discusses financial system stability assessment in Botswana. Botswana’s financial sector, which exhibits high integration between banks and non-bank financial institutions, withstood the pandemic well. The economic recovery continues to be strong, but inflation remains high with risks tilted to the upside. The financial sector appears broadly stable, sound, and resilient. Main risks relate to banks’ high concentration of lumpy short-term deposits from retirement funds and insurance companies, volatility in diamond prices, geo-political developments, and the tightening of global financial conditions. The challenging risk environment underscores the need to address the existing gaps in the financial stability framework and the supervisory regime that could impede Bank of Botswana’s operational independence in supervisory matters. The banking supervision approach should be more risk-based and forward-looking, with more skilled staff who can identify emerging risks in the more complex banking sector. Specific regulations for material risks should be issued and Pillar 2 supervisory assessments developed for more risk-sensitive capital requirements. Data gaps should be addressed to enable the implementation of stress tests on a globally consolidated basis, perform more granular analyses of household and corporate sector vulnerabilities, and activate macroprudential tools.
Keywords:
B. bank solvency stress tests; risk analysis; bank rating methodology; bank risk analysis; bank solvency stress tests; Nonbank financial institutions; Commercial banks; Financial sector stability; Credit; Global
Cover IMF Staff Country Reports
Botswana: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Botswana
International Monetary Fund. African Dept.
The 2023 Article IV Consultation highlights that following a strong recovery of almost 12 percent growth in 2021, Botswana’s economy grew by 5.8 percent in 2022, significantly above the long-run average of 4 percent. The authorities plan a fiscal expansion in FY2023 followed by two years of substantial fiscal adjustment to reach a small fiscal surplus by FY2025. Growth is expected to slow in 2023 due to a projected decline in diamond production, with the weaker global environment likely to depress other exports. Inflation has fallen since August 2022, returning to the central bank’s objective range. The authorities plan a fiscal expansion in FY2023 followed by two years of substantial fiscal adjustment to reach a small fiscal surplus by FY2025, but implementation risks are elevated. Structural transformation of the economy aims at diversifying production, increasing the relative size of the private sector, and enhancing resilience to external shocks.
Keywords:
liability positions vis-à-vis nonresident; inflation risk; Botswana authorities; transmission mechanism; PPI coverage; government action; Inflation; Central bank policy rate; Fiscal stance; Financial Sector Assessment Program; Global; Africa; Sub-Saharan Africa
Cover Analytical Notes
Exploring Multilateral Platforms for Cross-Border Payments
Bank of International Settlements
,
International Monetary Fund
, and
World Bank
This report provides an assessment of whether and how multilateral platforms could bring meaningful improvements to the cross-border payments ecosystem. It was written by the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) in collaboration with the BIS Innovation Hub, the International Monetary Fund (IMF) and the World Bank.1 The report analyses the potential costs and benefits of these platforms and how they might alleviate some of the cross-border payment frictions. It also evaluates the risks, barriers and challenges to establishing multilateral platforms and explores two paths for their evolution. The analysis is based on a stocktake, conducted by the CPMI, of existing and potential multilateral platforms as well as bilateral discussions with existing platform operators.
Keywords:
multilateral platform; payment message standard; cross-border payment friction; platform operator; payments programme; Payment systems; Currencies; Public sector; Correspondent banking; Global; Southern Africa; West Africa; Central America