Chapter

BOTSWANA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2004
Share
  • ShareShare
Show Summary Details
(Position as of February 29, 2004)
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 borne fully 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 borne fully 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%. No new loans will be issued under this scheme, and the scheme is to be phased out by 2006, once the existing loans are fully repaid by 2006.
Classification
Conventional pegged arrangementThe exchange rate of the pula is determined with reference to a weighted basket of currencies comprising the SDR (approximately 30%) and the South African rand (approximately 70%). On February 6, 2004, the Bank of Botswana (BOB) devalued the pula by 7.5% against this basket. The central bank deals in the following currencies: the dollar, the South African rand, the euro, the pound sterling, and the yen. 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 requirementsResidents are permitted to make payments for goods and services from outside sources using pula-denominated checks, provided that 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.
Payments arrangements
Bilateral payments arrangementsBotswana has bilateral trade agreements with the People’s Republic of China, the Czech Republic, the Republic of Korea, Malawi, Romania, Russia, Serbia and Montenegro, the Slovak Republic, 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 controlFor practical/operational purposes, several administrative powers of the BOB have been delegated to commercial banks.
International security restrictionsNo.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)There are no restrictions on trading or owning precious metals in commercial forms, such as coins, but there are restrictions on possession of unwrought precious metals, such as bullion.
Controls on exports and imports of banknotes
On exports
Domestic currencyA declaration is required for amounts equal to or in excess of P 10,000 at the time of travel.
Foreign currencyVisitors may take out any foreign currency that they legitimately own, subject to completion of a declaration for any amount equal to or greater than the equivalent of P 10,000.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyCommercial banks are authorized to open foreign currency accounts for permanent and temporary residents and for nonresidents. These accounts facilitate foreign receipts and payments for approved transactions, without requiring conversion of foreign currency receipts into pula and vice versa and offer protection 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 banks’ discretion.
Held abroadYes.
Accounts in domestic currency held abroadn.a.
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 importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresImport licenses are regulated by customs and excise legislation.
Negative listYes.
Import taxes and/or tariffsAs a member of the SACU, Botswana applies a CET only on imports from outside the SACU.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsThe maximum limits for exports free of payments are (1) for bona fide nonmonetary gifts, P 20,000 a year for a permanent resident; (2) for rejected goods, P 100,000 a transaction, subject to provision of documentary evidence; and (3) for commercial samples (i.e., goods for exhibitions or other promotional purposes), P 150,000 a transaction.
Financing requirementsn.r.
Documentation requirementsNo.
Export licensesCertain exports are subject to licensing, mainly for revenue purposes. The exportation of a few items, such as precious and semiprecious stones, requires a permit.
Without quotasYes.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
Investment-related paymentsAuthorized dealers may allow remittances of interim dividends without reference to the BOB for companies listed on the Botswana Stock Exchange (BSE) and may approve other remittances of dividends/profits without reference to the BOB, subject to satisfactory supporting documentation in relation to tax withholding.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
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 (BOB certificates), or any money market instrument, the purpose of which is to mop up excess liquidity in the system. On January 1, 2003, the government began issuing bonds with maturities of 2, 5, and 12 years; nonresidents may purchase up to 20% of the total value of these bonds.
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 exchange.
On money market instruments
Purchase locally by nonresidentsNonresidents are not permitted to purchase the monetary instruments used by the BOB to absorb excess liquidity.
Controls on derivatives and other instrumentsDealing in these instruments is subject to prudential foreign exposure limits.
Controls on credit operationsNo.
Controls on direct investmentNo.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsn.r.
Controls on personal capital transactionsNo.
Provisions specific to commercial banks and other credit institutions
Lending to nonresidents (financial or commercial credits)A commercial bank’s loans to nonresidents are restricted to 25% of the unimpaired capital for each nonresident customer, and, in aggregate, loans to nonresidents may 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.
Provisions specific to institutional investors
Limits (max.) on investment portfolio held 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.
Other controls imposed by securities lawsn.r.
Changes During 2003
Capital transactions
Controls on capital and money market instrumentsJanuary 1. The government began issuing bonds with maturities of 2, 5, and 12 years; and nonresidents were allowed to purchase up to 20% of the total value of these bonds.
Changes During 2004
Exchange arrangementFebruary 6. The BOB devalued the pula by 7.5% against the basket of currencies to which it is pegged.

    Other Resources Citing This Publication