BANK OF BOTSWANA
2019 Media Economic Briefing - Welcome Remarks
by
Moses D Pelaelo
Governor
May 21, 2019
Let me thank you, Distinguished Members of the Media, for honouring
the Bank's invitation to today's Economic Briefing, which also marks the
launch of the 2018 Bank of Botswana Annual Report. As I have
repeatedly indicated, the Bank of Botswana values greatly the critical
role played by the Media in the dissemination of financial, economic and
other information to the nation; it is, therefore, not a coincidence that this
economic briefing comes immediately after the briefing of His Excellency
The President and Members of the Cabinet.
The Annual Report is published in compliance with the Bank of
Botswana Act and, as a statutory requirement, contains a report on the
Bank's
operations and audited financial statements, that is to say, it is
the primary vehicle for accountability to the nation on the operations and
financial performance of the Bank.
In addition to the statutory aspects of the report, it is a tradition that the
Annual Report also includes a review of economic developments and
outlook, as well as a theme topic section. The review provides an
analytical content and explanations for economic developments and
prospects, as well as background to policy conduct and operations by
the Bank. In particular, this is with respect to monetary and exchange
rate policies, financial stability, banking sector regulation, currency
management, payments infrastructure and the management of foreign
exchange reserves. The successive theme topics contribute to national
economic policy analysis and evaluation and, hence, the requisite
response and transformation needed to sustain the desired level of
inclusive and diversified growth of the economy.
the Bank's
Distinguish Ladies and Gentlemen, financial performance
and operations in 2018 is against the background of moderation in the
pace of global economic growth, associated with slack in growth of
demand in an environment of policy uncertainty induced by increasingly
inward looking policies, heightened trade and geopolitical tensions, lack
of progress on Brexit and adverse climate. Meanwhile, in the region and
domestically, prospects for growth and transformation continue to be
adversely affected by both the inadequate pace and lack of traction of
structural and policy reforms.
Distinguished Members of the Media, you will note that the combination
of international developments and the domestic context affect the
immediate as well as the medium- to long-term outcomes. The first
presentation this morning will relate more to the immediate outcomes,
on the Bank's Operations and Financial Statements by
being the report
the Chief Financial Officer, Mr Daniel Loeto.
Mr Loeto will, among others, highlight the performance of the foreign
that, in turn, have a major impact on the Bank's
exchange reserves
financial performance and resulting revenues to government, and
identify the various influences. At this stage, I will just preface his
detailed explanations by indicating that the significant influences include,
an environment of low global interest rates, volatile valuations of assets
traded in global markets and currencies, trade and capital flows,
government operations and fiscal balances as well as changes in the
Bank's investment guidelines and associated portfolio rebalancing.
Distinguished Media Practitioners, as you would be aware, the Bank of
Botswana is one of the few central banks in the world whose financial
statements are prepared and audited in accordance with international
Bank's
reporting and auditing standards. I also wish to add that, the
financial statements, as has been the norm over the 43 years of the
Bank's existence,
have obtained a clean audit report that confirm
appropriate maintenance of accounts, existence of sound risk
management and internal control environment and, in general, effective
governance structures at the Bank of Botswana.
In this respect, I would like to assure the nation and other stakeholders
globally, that contrary to some unfortunate and inaccurate reporting by
some in the Media, that there is no single Thebe that is not fully
accounted for by the Bank of Botswana. For the record, kindly note that,
the Bank of Botswana is not audited by the Auditor General; the Bank of
Botswana is a separate legal entity, a central bank, audited by an
independent statutory public audit firm appointed in accordance with the
provisions of Section 67 of the Bank of Botswana Act. These public
audit firms are subject to rotation rules, of both the lead engagement
partner and the audit firm itself, after a prescribed period of time in
accordance with international best practice.
Distinguished Ladies and Gentlemen of the Media, you will also hear
from the Director of Research and Financial Stability, Dr Tshokologo
Alex Kganetsano, who will lay out the outcomes and explanations for
economic developments in 2018, as well as prospects going forward. He
will specifically discuss output, inflation, credit and interest rates,
exchange rates, as well as the main components of the balance of
nation's
payments and their impact on the foreign exchange reserves.
Following the review of economic developments, Dr Kganetsano will
summarise the theme topic for 2018, which is "Financing Strategies for
Industrialisation and Transition to High Income Status". He will explain
that this theme topic is a sequel to the 2016 and 2017 ones; intended to
complement and further enrich the policy analysis and prospects for
success of the national industrialisation strategy. This is through
highlighting areas for improvement, especially relating to funding and
related institutional governance and operational effectiveness necessary
for beneficial mobilisation and harnessing of financial resources using,
where relevant, cross-country examples, such as Brazil, Singapore and
the Republic of Korea.
You may recall that, last year I alluded to disharmony or misaligned
nexus between a stable macroeconomic environment and weak
economic outcomes; specifically insufficient growth rates, high
unemployment levels and income inequality, and the resulting slow pace
towards attainment of the high-income status. Let me bring to your
attention a recent study by the International Monetary Fund on "Growth
in Southern Africa: Issues and Reform Options"; it is not contained in the
Annual Report; but pertinent for public discourse on the
"middle-income"
trap.
The study identified three factors that continue to detract from growth
prospects and transition to high-income status. First, the lacklustre
relative export performance and shrinking tradeable sector. In contrast
to countries that attained middle-income status rapidly (in Latin America
and South-East Asia, for example), for Botswana, over the last few
as a share of the country's
years, the private tradeable sector declined
GDP. The second factor relates to the low and declining total factor
productivity encompassing land, capital and labour. The third one is the
relatively large public sector, including state-owned enterprises, with the
resulting sub-optimal delivery of services and utilities, compared to
middle-income peers. In their respective country assessments, the rating
agencies, Moody's and
S & P Global Ratings, also emphasise this last
point, namely, the need for a dynamic and expanded role of the private
sector in the economy, to achieve economic diversification and inclusive
growth. The combination of these factors contributes to declining
competitiveness in the country, in terms of access to infrastructure and
utilities, skills and, ultimately, tradeable goods and services.
Distinguished Ladies and Gentlemen of the Media, while the analysis is
obviously relative and involves country rankings, the Bank suggests that
the study provides relevant issues for consideration of policy responses.
Notably, this is in the areas relating to the balance between inward
versus outward-looking industrialisation options, land economy and
management, governance and accountability frameworks of institutions,
domestic resources mobilisation and allocative efficiency, capital
markets development and skills transformation, among others. I suggest
that, to sustain medium to long-term prospects for the economy,
diversified and inclusive growth and transition to high-income status,
policy should focus on raising potential growth through structural and
fiscal reforms, while maintaining sound macroeconomic policy
frameworks and a stable financial sector, as well as rebuilding buffers to
boost resilience. The 2018 theme topic is, therefore, a contribution in
this regard.
Distinguished Ladies and Gentlemen, allow me to introduce to you my
colleagues here in the room and, thereafter, call upon the Chief
Financial Officer, Mr Daniel Loeto to kick-start the presentations.
I thank you for you kind attention.