Chapter

BOTSWANA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2000
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Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: November 17, 1995.
Exchange Arrangement
CurrencyThe currency of Botswana is the Botswana pula.
Exchange rate structure
DualSome external loans undertaken by parastatals before October 1, 1990, are protected from exchange rate movements under a Foreign Exchange Risk-Sharing Scheme (FERSS). Under the scheme, risks associated with exchange rate fluctuations up to 4% are fully borne by the borrower, while the next 6% and the following 5% of fluctuations are shared between the borrower and the government in ratios of 50:50 and 25:75, respectively. Risks associated with exchange rate fluctuations in excess of 15% are fully borne by the government. The scheme is symmetrical in that the borrower and the government share any gains from an appreciation in the external value of the pula on the same basis. Under the FERSS, borrowers obtain foreign exchange for servicing their external debt at exchange rates that may differ from the market rate by more than 2%. The scheme is to be phased out once the existing loans are fully repaid. No new loans will be issued under this scheme.
Classification
Conventional pegged arrangementThe exchange rate of the pula is determined with reference to a weighted basket of currencies comprising the SDR and the South African rand. The central bank deals in four currencies: the dollar, the South African rand, the euro, and the pound sterling. Foreign exchange bureaus are licensed to deal in foreign currencies, on a spot basis only.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketForward exchange cover is offered by the commercial banks, and the maturity dates of forward exchange contracts/transactions are not restricted.
Official cover of forward operationsYes.
Arrangements for Payments and Receipts
Prescription of currency requirementsThe requirement that payments from abroad be made in foreign currency was abolished with the removal of exchange controls on February 8, 1999. Transacting parties are now free to determine the currency of the transaction. Residents are permitted to make payments for goods and services sourced from outside Botswana using pula-denominated checks, provided that the traders outside Botswana are willing to accept their collection by banks outside Botswana. Such transactions are subject to supporting documentation for checks in amounts exceeding P 10,000.
Payment arrangements
Bilateral payment arrangementsBotswana is a signatory to various bilateral trade agreements with the following countries: China, the Czech Republic, Republic of Korea, Malawi, Romania, Russia, the Slovak Republic, the Federal Republic of Yugoslavia (Serbia/Montenegro), Zambia, and Zimbabwe.
OperativeYes.
InoperativeYes.
Regional arrangementsBotswana is a member of the SACU, which allows for free import movements and, hence, has no restrictions on trade-related payments to or from SACU countries.
Administration of controlUntil the abolition of exchange controls on February 8, 1999, the Bank of Botswana administered exchange controls on behalf of the government of Botswana. For practical/operational purposes, several administrative powers of the Bank of Botswana had been delegated to commercial banks.
International security restrictionsNo.
Payment arrearsNo.
Controls on trade in gold (coins and/or bullion)Until the abolition of exchange controls on February 8, 1999, dealing in gold was restricted. Since then, there are no restrictions on trading or owing precious metals in the form of articles of commerce, such as coins, but there are restrictions on possession of unwrought precious metals, such as bullion, as per section 3 of the Unwrought Precious Metal Act, §20.03.
Controls on exports and imports of banknotesNo.
On exports
Domestic currencyUntil February 8, 1999, residents were allowed to export up to P 10,000 a person a day. Since then, travelers may export any amount and are only required to complete a declaration form for amounts equal to or in excess of P 10,000 at the time of travel.
Foreign currencyUntil February 8, 1999, residents were allowed to take out up to the equivalent of P 10,000 a trip. Visitors may take out any foreign currency that they legitimately own, subject to completion of a declaration form for any amount equal to or greater than P 10,000.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyCommercial banks are authorized to open foreign currency accounts for permanent, temporary residents, and nonresidents. These accounts facilitate foreign receipts and payments for approved transactions, without having to convert foreign currency receipts into pula and vice versa, and to protect against fluctuations in exchange rates. Commercial banks are authorized to open foreign currency accounts for their customers for any amount in any currency at the discretion of banks.
Held abroadResidents are permitted to open and maintain foreign currency abroad without prior approval from the Bank of Botswana.
Accounts in domestic currency convertible into foreign currencyNo.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsUntil February 8, 1999, when exchange controls were abolished, advance payments were permitted only for a legitimate commercial need.
Documentation requirements for release of foreign exchange for importsUntil February 8, 1999, payments for imports of value exceeding P 10,000 a transaction required supporting documentation before the foreign exchange was released.
Import licenses and other nontariff measuresImport licenses are regulated by customs and excise legislation.
Negative listYes.
Open general licensesn.r.
Licenses with quotasn.r.
Other nontariff measuresn.r.
Import taxes and/or tariffsAs a member of the SACU, Botswana applies a common external tariff only on imports from outside the SACU.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsUntil February 8, 1999, residents were obligated to receive proceeds in a foreign currency or from a nonresident pula account within six months of the date of exportation. Effective February 8, 1999, repatriation requirements were abolished. The maximum limits for exports free of payments for the following goods are: bona fide nonmonetary gifts, P 20,000 for a permanent resident a year; rejected goods, P 100,000 a transaction, subject to providing documentary evidence; and commercial samples (i.e., goods for exhibitions or other promotional purposes), P 150,000 a transaction.
Surrender requirementsRetention of export proceeds for up to one year to finance certain transactions was permitted by the Bank of Botswana on a case-by-case basis. Effective February 8, 1999, surrender requirements were abolished.
Financing requirementsn.r.
Documentation requirementsNo.
Export licensesCertain exports are subject to licensing, mainly for revenue reasons. The exportation of a few items, such as precious and semiprecious stones, requires permits.
Without quotasYes.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersUntil February 8, 1999, when exchange controls were abolished, authorized dealers required documentary evidence for payments in excess of P 10,000 a transaction to establish that the payment is for a legitimate purpose and a current account transaction.
Investment-related paymentsAuthorized dealers may authorize remittances of interim dividends without reference to the Bank of Botswana for companies listed in the Botswana Stock Exchange (BSE) and may approve other remittances of dividends/profits without reference to the Bank of Botswana subject to satisfactory supporting documentation.
Quantitative limitsAuthorized dealers were permitted to authorize interest payments at a rate not exceeding 2% a month on import-related payment charges, i.e., interest charged on arrears, but prior Bank of Botswana approval was required if the charge was more than 2% a month. The repayment of loans was not to be more than P 2 million for a company and P 200,000 for individuals. Effective February 8, 1999, these requirements were abolished.
Indicative limits/bona fide testUntil February 8, 1999, there were indicative limits for the payment of interest.
Payments for travel
Quantitative limitsPermanent and temporary residents were permitted to retain unused foreign exchange travel facilities in foreign currency notes, coins, or traveler’s checks up to the equivalent of P 10,000 instead of P 2,000. Any excess amount was to be surrendered to an authorized dealer within six months of the date of return. Effective February 8, 1999, these requirements were abolished.
Personal payments
Prior approvalUntil February 8, 1999, residents required prior approval of the Bank of Botswana to take up pension from nonresidents.
Foreign workers’ wages
Quantitative limitsEffective February 8, 1999, no restrictions are imposed on remittances of foreign workers’ wages.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Surrender requirementsThe amount of unused foreign currency for travel that a resident was allowed to retain for future travel use was the equivalent of P 10,000 in currency or traveler’s checks. Any excess amount was to be surrendered within six months of the date of return. Effective February 8, 1999, foreign currencies received in payment for goods and services in Botswana by traders may be retained and surrendered to authorized dealers or other foreign exchange dealers at the discretion of such traders.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsNo controls are placed on the participation of nonresidents in debt instruments issued in the domestic market, except that nonresidents are not permitted to purchase central bank bills (Bank of Botswana certificates), or any money market instrument, the purpose of which is to mop up excess liquidity in the system.
Sale or issue locally by nonresidentsNonresidents are permitted to issue long-term, pula-denominated bonds traded on the BSE, subject to the listing requirements of the BSE.
Purchase abroad by residentsIndividuals and business entities could invest abroad up to P 1 million and P 30 million, respectively, in offshore securities. These limits were abolished on February 8, 1999.
On money market instruments
Purchase locally by nonresidentsNonresidents are not permitted to buy the monetary instruments used by the Bank of Botswana to absorb excess liquidity.
Controls on derivatives and other instrumentsThese controls are subject to foreign exposure limits of a particular bank.
Controls on credit operations
Commercial credits
By residents to nonresidentsNonresident-controlled companies (including branches of foreign companies) were allowed to borrow locally from all sources up to P 1 million. Banks and other credit institutions in Botswana were permitted to grant loans and other credit facilities to nonresident-controlled entities up to 10:1 debt-to-equity ratio (after the initial tranche of P 1 million), without prior authorization from the Bank of Botswana. These limits were abolished on February 8, 1999.
To residents from nonresidentsAuthorized dealers are permitted to receive loan funds from nonresident sources on behalf of the permanent resident customers up to an equivalent of P 200,000 and P 2 million in respect of individuals and companies, respectively, without any prior reference to the Bank of Botswana. Interest on these loans was restricted to 1% above the relevant LIBOR and 0.5% above the bank prime lending rate for foreign-denominated and pula loans, respectively. These limits were abolished on February 8, 1999.
Controls on direct investment
Outward direct investmentAuthorized dealers were allowed to make foreign currency available to individuals and companies of amounts of up to P 1 million and P 30 million, respectively, for either acquiring interest in existing business ventures or establishing new business. Companies must have been in operation for two years and registered with the Commissioner of Taxes. These limits and requirements were abolished on February 8, 1999.
Controls on liquidation of direct investmentProceeds up to P 100 million could be repatriated immediately, but the excess of that amount was allowed to be repatriated in tranches as agreed upon with the Bank of Botswana. With the abolition of exchange controls on February 8, 1999, these limits were removed.
Controls on real estate transactions
Purchase abroad by residentsPurchases limited to P 1 million for individuals and P 30 million for business entities were allowed, provided they used their foreign exchange allowances. These limits were removed on February 8, 1999.
Sale locally by nonresidentsn.r.
Controls on personal capital movementsNo.
Provisions specific to commercial banks and other credit institutions
Lending to nonresidents (financial or commercial credits)Loans to nonresident customers are restricted to 25% of unimpaired capital of a commercial bank, and in aggregate, loans to nonresidents should not exceed 800% of a bank’s unimpaired capital.
Purchase of locally issued securities denominated in foreign exchangeThese transactions are subject to the listing requirements of the BSE.
Open foreign exchange position limitsPrudential limits are set for exposure per currency and for the overall foreign currency risk exposure. For major dealing currencies, the limit is 15% of a bank’s unimpaired capital and for others, it is 5%. The limit for the overall foreign exchange exposure is 30% of the unimpaired capital of a bank using the shorthand method.
On resident assets and liabilitiesn.r.
On nonresident assets and liabilitiesn.r.
Provisions specific to institutional investors
Limits (max.) on securities issued by nonresidents and on portfolio invested abroadn.r.
Limits (max.) on portfolio invested abroadInstitutional investors, such as pension funds and life insurance companies, may invest not more than 70% of their assets outside Botswana. This control is imposed by the Registrars of Insurance and Pension and Provident Funds.
Currency-matching regulations on assets/liabilities compositionn.r.
Other controls imposed by securities lawsn.r.
Changes During 1999
Arrangements for payments and receiptsFebruary 8. All exchange controls were abolished.
Exports and export proceedsFebruary 8. Repatriation and surrender requirements were abolished.

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