President Lt Gen. Seretse Khama Ian Khama has warned that current economic challenges would be greater than what the nation experienced in 2008/09.
Delivering the State-of-the-Nation-Address yesterday (November 9), President Khama said latest indicators suggested a decline in the demand for diamonds during the second half of the current financial year.
He said economic growth slowed in 2014 when compared with 2013 due to decreased growth in both mining and non-mining sectors.
He said information from Statistics Botswana showed that the economy expanded by 4.4 per cent in 2014, down from 9.3 per cent recorded the previous year.
The mining sector, he added, registered a growth of 4.5 per cent in 2014, down from the exceptional 23.9 per cent registered in 2013, resulting from a general decline of commodity prices including weakened demand for diamonds.
“The non-mining sector also registered a lower growth, at 4.4 per cent in 2014 as compared to 6.8 per cent in 2013, with the challenges of the water and electricity sectors being especially difficult,” he said.
President Khama said the latest International Monetary Fund (IMF) World Economic Outlook report projected a modest global growth rate of 3.1 per cent for this year.
“Due to the steeper than originally projected slowdown in mineral revenue, our expanded domestic growth has also been adjusted downwards to 2.6 per cent this year,” President Khama said.
On domestic inflation, President Khama said he was pleased it had continued to fall within the Bank of Botswana’s medium term objective range of 3-6 per cent, with monthly rate ranging from 2.8 per cent 3.6 per cent during the first half of the year.
“This trend is expected to continue in the coming months, due in part to lower fuel prices,” he said.
Furthermore, President Khama said the central bank had pursued an accommodative monetary policy, lowering the bank rate to 6 per cent thus lowering the cost of borrowing.
“In January 2015, the weights of the currencies in the Pula basket were revised to 50 per cent South African Rand and 50 per cent Special Drawing Rights (SDR) currencies, based on inflation differentials, while a zero annual rate of crawl of the Pula exchange rate was implemented for the year,” he added.
He also indicated that the exchange rate between the Pula and SDR currencies has had a positive impact on Foreign Exchange Reserves, which as of August this year, were estimated at P87.8 billion, a 16.3 per cent increase from P75.5 billion in August last year. “Of the total amount in August 2015, the Government Investment Account, which is government’s savings, was P39.6 billion,” he said.