Gov’t reserves bounce back on diamond revenues
Mbongeni Mguni | Monday June 20, 2022 06:00
The reserves, managed by the Bank of Botswana (BoB), dropped to a record low of P3.3 billion in December 2020 due to withdrawals by treasury to finance the pandemic response. The reserves were measured at P18.3 billion in April 2020 when the virus was first confirmed in the country and have remained below that level since then.
Appearing before recent Parliament’s Public Accounts Committee, Finance Ministry permanent secretary, Wilfred Mandlebe said the rebound in diamond exports last year had helped the reserves to their strongest position in two years.
He added that receipts from external loans such as the US$250 million World Bank support secured last year, as well as the once off Special Drawing Rights’ allocation by the International Monetary Fund of about P3 billion, had also contributed to the positive reserves figure.
“The message is that we have kind of recovered from the trough we were in where the reserves were very low because we used a lot of them for COVID-19,” Mandlebe said.
“The latest figure is still below the pre-COVID level but at least it is a reasonable amount.”
Debswana sold P38.1 billion worth of diamonds in 2021, the highest since 2016, as global demand surged following the COVID-19 restrictions of 2020. State-owned diamond trader, Okavango Diamond Company also reported sales of $963 million in 2021, an all-time high for the 10-year-old company. Debswana sells 25% of its production to ODC and the balance through the De Beers sales platform.
The improvement in the reserves, continues a recovery in the country’s fiscal position, as seen recently by revisions of the anticipated budget balance for the 2021-2022 financial year. The Ministry of Finance now expects that from an initial forecast of a P10.2 billion deficit for that period, the 2021-2022 financial year will produce a small surplus, the country’s first in five years. Final figures for the 2021-2022 financial year are due in August.
Finance Ministry acting chief public relations officer, Same Gower, told BusinessWeek that whatever surplus occurs from the 2021-2022 financial year would be used to continue rebuilding government’s reserves.
“Should a budget surplus result, this will be used to restore financial balances in the GIA rather than to pay down debt,” she said in response to emailed questions.
“It is important that the government has access to financial buffers in order to cope with the impact of potential unexpected shocks.
“This is what enabled government to be able to respond quickly when COVID hit.
“However this led to the running down of the GIA, hence the priority of restoring it to a level that provides a meaningful protection against future shocks.”
Gower added that despite the improved budget outlook, the domestic debt programme had continued at pre-planned levels during the 2021-2022 financial year. Under the programme, approved to a limit of P30 billion by Parliament, the BoB raises debt for government through the monthly auction of treasury bills and bonds.
“The domestic bond and T-Bill issuance programme continued as planned, with any surplus financing available over and above immediate budgetary needs utilised to rebuild the financial buffers,” she said.
In the 2021-2022 financial year, the central bank raised P12.1 billion for government in the capital market and in the first three auctions of the 2022-2023 financial year, has raised P3.5 billion. Government returns to the capital market on June 30 seeking P1.5 billion through the floating of two treasury bills and three bonds.