Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

BOTSWANA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: November 17, 1995.
Exchange Measures
Restrictions and/or multiple currency practicesThe staff report for the 2006 Article IV consultation with Botswana states that as of December 4, 2006, Botswana maintained a multiple currency practice subject to Fund approval under Article VIII, Sections 2(a) and 3, arising from the Foreign Exchange Risk-Sharing Scheme (FERSS) applicable to outstanding external loans obtained by certain public enterprises before October 1, 1990. (Country Report No. 07/227)
International security restrictionsNo.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Botswana is the Botswana pula.
Exchange rate structure
UnitarySome 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; 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. Currently only one loan obtained by a public enterprise is still outstanding under the old FERSS, and it matures in 2016. The scheme was terminated in 1990. Effective January 1, 2006, the exchange rate structure was reclassified to unitary from dual due to technical correction in the classification.
Classification
Crawling pegThe exchange rate of the pula is determined with reference to a weighted basket of currencies. The pula is adjusted continuously against the basket according to factors that include the difference between expected inflation in Botswana and in major trading partner countries. The spread between the buying and selling rates of the pula is 0.5%.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketForward exchange cover is offered by the commercial banks, and the maturity dates of forward exchange contracts and transactions are not restricted.
Official cover of forward operationsYes.
References to legal instruments and hyperlinksn.a.
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 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.
Controls on the use of domestic currencyn.a.
Use of foreign exchange among residentsn.a.
Payments arrangements
Bilateral payments arrangementsBotswana has bilateral trade agreements with Malawi, Zambia, and Zimbabwe. The trade agreement with Romania was terminated on September 1, 2006.
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.
Clearing agreementsn.a.
Barter agreements and open accountsn.a.
Administration of controlFor practical and operational purposes, several administrative powers of the Bank of Botswana (BOB) have been delegated to commercial banks.
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 unworked precious metals, such as bullion.
On domestic ownership and/or tradeYes.
On external tradeYes.
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.
References to legal instruments and hyperlinksn.a.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyCommercial banks are allowed to open foreign currency accounts for residents. 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.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedCommercial banks are allowed to open foreign currency accounts 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.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
References to legal instruments and hyperlinksn.a.
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.
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 CET only on imports from outside the SACU.
State import monopolyNo.
References to legal instruments and hyperlinksn.a.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsn.r.
Documentation requirementsThe maximum limits for exports free of payments are (1) for bona fide nonmonetary gifts, P 20,000 or its equivalent 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.
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.
References to legal instruments and hyperlinksn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfers
Investment-related paymentsADs 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 or profits without reference to the BOB, subject to satisfactory supporting documentation in relation to tax withholding.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsn.a.
Surrender requirementsn.a.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsYes.
Bonds or other debt securities
Purchase locally by nonresidentsNonresidents may purchase up to 20% of the total value of government-issued 2-, 5-, and 12-year bonds, at the time of issue.
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 transactions
Sale locally by nonresidentsn.r.
Controls on personal capital transactionsNo.
References to legal instruments and hyperlinksn.a.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutionsEffective March 1, 2006, the sale of BOB certificates to counterparties was restricted to commercial banks and merchant banks.
Lending to nonresidents (financial or commercial credits)A commercial bank’s loans to nonresidents are restricted to 25% of a bank’s unimpaired capital for each nonresident customer, and the large-exposure loans (i.e., loans in excess of 10% of unimpaired capital) to resident and nonresident companies may not exceed 800% of the unimpaired capital of the bank.
Purchase of locally issued securities denominated in foreign exchangeThese transactions are subject to the listing requirements of the BSE.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsReserve requirements apply only to domestic currency deposits. On February 1, 2006, the required reserve ratio was increased to 5% from 3.5%.
Open foreign exchange position limitsPrudential limits are set for exposure by 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
Insurance companies
Limits (max.) on securities issued by nonresidentsn.r.
Limits (max.) on investment portfolio held abroadLife insurance companies may invest up to 70% of their assets outside Botswana. This control is imposed by the Registrar of Insurance.
Currency-matching regulations on assets/liabilities compositionn.r.
Pension funds
Limits (max.) on securities issued by nonresidentsn.a.
Limits (max.) on investment portfolio held abroadPension funds may invest up to 70% of their assets outside Botswana. This control is imposed by the Pension and Provident Funds Act.
Limits (min.) on investment portfolio held locallyn.a.
Currency-matching regulations on assets/liabilities compositionn.a.
Investment firms and collective investment fundsn.a.
References to legal instruments and hyperlinksn.a.
Changes during 2006
Exchange arrangementJanuary 1. The exchange rate structure was reclassified to unitary from dual due to technical correction in the classification.
Arrangements for payments and receiptsSeptember 1. The bilateral trade agreement with Romania was terminated.
Provisions specific to the financial sector
Provisions specific to commercial banks and other credit institutionsFebruary 1. The required reserve ratio was increased to 5% from 3.5%.
March 1. The sale of BOB certificates to counterparties was restricted to commercial banks and merchant banks

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