Government Adjusts Weights of Currencies

| January 30, 2015

Following review of trade patterns between Botswana and the rest of the world, government has adjusted the weights of currencies in the Pula basket.

A press release from Ministry of Finance and Development Planning stated that government had approved a recommendation to “change the basket weights of currencies to 50 per cent South African rand and 50 per cent International Monetary Fund Special Drawing Rights and a zero rate of crawl for 2015.”

The change reduced the weight of the South African Rand from 55 to 50 per cent and increased the weight of a composite group of foreign currencies known as Special Drawing Rights (SDR) of the IMF from 45 per cent to 50 per cent.

The Pula exchange rate was fixed to a basket of currencies comprising of the South African Rand and the IMF’s Special Drawing Rights which consisted of the US Dollar, the Euro, the British Pound and the Japanese Yen.

The release further stated that the Pula had been crawling downward at the rate of 0.16 per cent per annum in 2014. One of Botswana’s exchange rate policy objectives was to maintain a stable and competitive real exchange rate of the Pula against a basket of international currencies, says the release.

In an interview with BOPA macroeconomic policy deputy secretary in the Ministry of Finance and Development Planning Mr Kelapile Ndobano said, “Currently the weight of the South African Rand has been 55 per cent but after reviewing our trading with other countries, we realised that Botswana has increased trading with other foreign currencies and less trading with South Africa than before.”

He further added that with this adjustment the influence of South African Rand in the determination of the value of the Pula has been lowered accordingly. The weight of other foreign currencies represented by the SDR will now be ger, “he said.

Basket Weight: Pula is calculated as a proportion of South African Rand and SDR and these proportions are called weights.

SDR: this is a composite of internationalforeign currencies namely US Dollar, British Pound, Japanese Yen and Euro.

Source : BOPA

Source : Botswana Daily News

Category: Business & Finance

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