A higher score from a ratings agency generally means cheaper borrowing for governments
A higher score from a ratings agency generally means cheaper borrowing for governments

Botswana’s National Assembly on Wednesday endorsed the doubling of the southern African country’s domestic borrowing to 30 billion pula (about 2.9 billion U.S. dollars).

Thapelo Matsheka, minister of finance and economic development, had approached parliament seeking the approval of lawmakers to increase the bond program ceiling from 15 billion pula (about 1.45 billion dollars).

Against the backdrop of an economic slowdown caused by the COVID-19 pandemic, Matsheka told parliament that increasing the limit for domestic borrowing was one of the fundamental options to fund the national budget.

Botswana, which boasts one of the highest sovereign credit ratings in Africa, is conventionally unenthusiastic about external funders for loans before exhausting all the available options domestically, hence increasing the bond program ceiling.

“The development would cultivate more activity in the local capital market, which in turn would reduce the risks of drawing down from reserves and the risk of borrowing externally at exorbitant interest and foreign exchange rates,” Matsheka said after the parliamentary approval.

Moses Pelaelo, governor of the Bank of Botswana, said borrowing more local capital market offers the government a viable avenue for cost-effective domestic resource mobilization for long-term investment and funding of government projects.

“This will result in a more frequent issuance of a sufficient quantum of domestic government securities in a predictable arrangement that hopefully will attract a larger pool of participants and support deficit financing with lower risks,” Pelaelo said in a telephone interview with Xinhua.

The latest information from the ministry of finance and economic development indicate that Botswana’s gross domestic product (GDP) will shrink by 13.1 percent in the 2020/21 financial year, with the budget deficit set to reach 5.9 percent of the GDP.

According to the information, the projected shrinking of the GDP is the worst since the global recession of 2009, when the economy of the world’s second-biggest diamond producer by value shrank 7.7 percent.

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Xinhua News Agency, Xinhuanet is an important central news service-oriented website, an important information organ of the central government, and an important platform for building up China's online international communication capacity. Established on November 7, 1997, as an online news provider of the Xinhua News Agency, it was officially named Xinhuanet on March 10, 2000 and began around-the-clock news release with leading online public opinion at home and setting a good image of China abroad as its main task.


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