Policy Watch

Botswana Monetary Policy Statement


The Bank of Botswana maintained the key rate at 6% given the stability of the expectation in the inflation range between 3 and 6%.

Botswana Monetary Policy


In prevision of a stability in prices, the Bank of Botswana decided to keep its key rate unchanged at 6.5%

Botswana Monetary Policy Statement


Given the stable economic outlook and the adequacy of the inflation targets (3-6%) with the current economic state, the Bank of Botswana took the decision to maintain the key rate at 7.5%.

Debt vs GDP / Bonds vs bills

All Data - Botswana

Year 2012 2013 2014 2015 2016 2017
GDP (billions US$) 14.54 14.78 13.40 - - -
Total Outstanding Amount (Billion US$) 0.92 0.86 - - - -
Bonds 0.76 0.74 - - - -
Bills 0.16 0.12 - - - -
Outstanding Amount/GDP (%) 6.32% 5.82% 0.00% - - -

Country Summary

Botswana financial industry is one of the most transparent, reliable and sound of the continent. It is considered however shallow in world standards: the ratio of private sector credit to GDP was 12% at the end of 2014, whereas the average for Sub-Sahara Africa is 17% and 67% for the world. The growth of the industry slightly declined between 2013 and 2014: from 5,5% to 4,8%. Two institutions regulates the industry: the Bank of Botswana (BoB), which supervises banks, bureaus de change, deposit taking micro-finance institutions and statutory banks and the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) which is in charge of insurance firms, pension firms, stock exchange, fund managers, other investment advisors, collective investment schemes, global businesses.

Botswana banking sector is dominated by commercial banks; there were 11 at the end of 2014. The sector is very much concentrated and much capitalized: the 4 largest banks hold 81% of the assets and the average banking capital adequacy ratio was 18,9% (above the minimum required ratio of 15%). Botswana banks are also considered sound, liquid, on top of being profitable: the return on equity was 19,1% in 2014 and the liquidity ratio (liquid assets to total assets) was 14,5%, registering a decline due to a reduction bank holdings of Bank of Botswana certificates (BoBCs). Although the sector suffers from some drawbacks (lack of competition and innovation and a limited offering of financial products), Botswana banking sector showed increased competition and is reporting lower interest rates.

On the other hand, the pension fund industry, which comprises 93 licensed pension funds in 2014, reports an asset growth of of 11,9%, for a total assets of P59,4 billion. The industry is regulated by the Pension and Provident Funds Act, 1987 which will soon be replaced by the Retirement Funds Bill, which was submitted in February 2014; along this law, the NBFIRA is in the process of drafting the Retirement Funds Regulations. Botswana pension funds are allowed to invest up to 70% of their assets offshore; as a result, offshore investments by Botswana pension funds was 59% of total pension fund assets.. For the insurance industry, assets totaled P 59,7 billion in 2013 for 258 insurance firms; premiums of the sector grew by 1,6% between 2012 and 2013. In the investment management industry, there were 6 licensed management firms, representing a total assets of P 59,7 billion at the end of March 2014, of this, 64% was from pension funds.

The Capital Markets is small and is comprised of Global Business Companies (International Financial Services Centres) and the Stock Exchange. Botswana stock Exchange (BSE) market capitalization was Pula 415,8 billion at the end of March 2014. The Exchange saw various improvements in recent years, among which the following: the launch of an Automated Traded System (ATS), the reduction in settlement time to T+3 d, the dematerialization of debt securities, the introduction of a bond index. The capital markets is faced with two hindrances: 1) an absence of a Securities Act and delays in establishing or amending the legislation, 2) gaps in the current legislation regarding regulation of capital market companies.

Botswana’s bond market is small, illiquid and fragmented: at the end of March 2014, there were 6 government bonds, 4 quasi government bonds and 25 corporate bonds, with respective values of 6,194 billion, P 0,41 billion and P 2,796 billion. The development of the bond market is fairly nascent; it is in 2003 that the government started issuing sovereign debt, premised on the recognition of the need a proper domestic debt market. Until then, the government did not need to borrow domestically, thanks to its large budget surplus. The launch of the first Note Programme, in 2008 paved the way to the birth of the current Botswana domestic debt market. Total outstanding amount of T-bills and T-bonds amounted to P 7,2 billion at the end of 2014 of which T-bills amounted to P 540 million.

There is a commitment from the Botswana government to develop the domestic debt market: a Bond Market Development Strategy was launched and a Bond Market Task force was set up, both initiatives aimed at addressing the weaknesses of the bond market. In 2013, the government launched new bond indices: a government bond index, a corporate bond index and a composite bond index.

The introduction of the Note Programmes paved the way to the birth of the current Botswana domestic debt market. The Botswana’s bond market is small, illiquid and fragmented. The government of Botswana is committed to the development of the bond market. It launched a Bond Market Development Strategy and set up a Bond Market Task force; these two initiatives aimed at addressing the weaknesses of the bond market. In 2013, the government decided to launch new bond indices: a government bond index, a corporate bond index and a composite bond index.

Monetary policy & Public debt

The objective of the Bank of Botswana (BoB) is to achieve a low and stable inflation environment. Since 2008, the BoB has adopted a monetary framework that employs the inflation rate as a signal for the monetary policy (although not an inflation-targeting framework); the approach is more a medium term one. The medium-term interest rate range (3 years) was set at 3 to 6% (vs.3-5% for neighboring countries). The BoB uses the Bank rate, open market operations, Bank of Botswana certificates (BoBCs) and reverse repos to manage liquidity; reserve requirements are also used on the other hand for sterilization purposes.

The inflation in Botswana is influenced by South Africa’s inflation rate and fluctuations in the pula-rand exchange rate. Between December 2013 and 2014, the inflation rate was reduced from 4,1% to 3,8%. During 2014, the bank rate was maintained at 7.5% in light of benign inflationary pressures.

There is no debt management strategy in Botswana; the Ministry of Finance is working towards elaborating one – expected for March 2014.Botswana’s public borrowing capacity is determined by a set of three laws (the Constitution, the Stock Bonds and Treasury Act and the Finance and Audit Act). Government borrowings through bonds and T-bills increased from 6.7 billion pulas to 7.2 billion between December 2013 and2014. Government and government guaranteed debt is projected at 29,2 billion pulas for 2015. Currently Botswana can borrow up to 40% GDP (20% internally and 20% externally).

Prior to 2008, Botswana was recognized for its prudent fiscal management policies, which propelled the country from a poor country status to that of a middle-income one. After the financial crisis in 2008, however, the government embarked in a series of fiscal consolidation measures so as to reduce budget deficit; the government plans also on strengthening its tax collection system and on establishing a Medium-term Expenditure framework.  

Market Structure

Market participants


The Central Bank, the Bank of Botswana (BoB), acts as the banker and the issuing agent of the government.

State-owned companies and parastatal agencies sell their own securities. Among the issuers are Botswana Building Society, Botswana Housing Corporation, Botswana Vaccine Institute, Debt participation Capital Funding Ltd., National Development Bank and Water Utilities Corporation.

Investor base

Primary Dealers and their clients are the main investors in government bonds, with respectively 24,7% and 75% of the securities at the end of 2014. The BoB and foreign investors hold the remaining share of securities, with 0,3% of the notes. 

Other intermediaries

Botswana's capital market has a large number of dealers appointed by the Central Bank for the purpose of handling government securities. In addition to all the licensed commercial and merchant banks, four licensed stockbrokers are also permitted to participate in the primary market; there are Motswedi Securities, Stockbrokers Botswana, Imara Capital Securities and Africa Alliance Botswana Securities. 

Instruments issued

Instruments issued by the government

Three and six-months Treasury bills are sold by the Government of Botswana. Treasury bonds on the other hand have various maturities ranging up to 17 years (as of September 2013). 

Most of the securities are fixed-rated; floating-rate instruments represent a smaller percentage of all securities issued (the floating instruments are benchmarked on the 91-d Botswana monetary policy instrument, the 91-d BoB certificate rate).

Average yield and time to-maturity


Primary and secondary markets

Primary Market

Primary dealers (PDs) are appointed by the BoB to participate in the primary market. All rights and obligations of PDs are contained in the Primary Dealer Agreement (2008).  The public is also allowed to participate in the initial sales.

Auction invitations are sent one week in advance through Reuters. Authorized Primary Dealers (PDs) are invited to submit their bids using this system. The auction is conducted every Friday (for settlement the following Wednesday).

Bids on Treasury bonds are made on a yield basis (at 0.005%). The allocation of bids is made using a uniform pricing method.

Secondary market

OTC vs. Exchange-listed

Bonds list and trade on the BSE, although most of the secondary trading takes place OTC. Trading is among PDs who must report all trades to the Central Bank by the second business day following the transaction at the latest.

The secondary market is illiquid and mostly inactive. Price discovery is inefficient and unsystematic. 

Trading System

On August 2012, the BSE introduced an Automated Trading System (ATS) to replace the Central Security Depository facility that was in use. Although the ATS was originally designed to trade bonds, equities and GDRs, it can only trade equities and ETFs.

The BSE has amended its trading rules to include a new bond pricing formula, developed on the basis of the South African pricing formula.

Clearing, Settlement and Custody

A Central Security Depository is in place since 2008, but it awaits to be operational for government securities. The Bank of Botswana (BoB) remains the Clearing Agent of all government securities. Clearing of bonds listed on the BSE happens on a transaction basis.

The “National Clearance and Settlement Systems” governs the procedures pertaining to clearing, settlement and custody of both government and private equity securities.

Recent developments

Recent regulatory developments in the capital markets include: the development of the financial resources requirements which concern market intermediaries, the introduction of the Securities Bill expected for July 2014 and the application for membership of Botswana Stock Exchange at the IOSCO in February 2014.

Investor Protection

The country has very stringent anti-corruption laws which are effectively enforced and the nationalization of private property is prohibited by the Constitution.

In 2014, Botswana was ranked 31th (out of 174 countries) in the Corruption Perception Index of Transparency International. This placed Botswana as the least corrupt country in Africa, ahead of comparators such as Cape Verde and Mauritius. The investor protection framework is relatively sound, as reflected by the ranking of 52 (out of 189) in the dimension of Investor Protection in the 2014 Doing Business Report.

Guide to Buying Bonds

Procedures for market participation

Individuals can participate in the auction process (if they have access to timely information).  Alternatively, they can contact one of the Primary Dealers (PDS) appointed by the Central Bank to invest in government securities.

The minimum investment amount in any government securities is P 10,000.

Settlement cycle

The settlement cycle is T+3 days.


In accordance with the 7th schedule to the Income Tax, non-residents are subject to a 15% withholding tax; residents, except those exempted from tax, on the other hand must pay 10%

There is no capital gains tax.

Botswana has double tax agreements with the following countries:

  • Barbados
  • France
  • India
  • Mauritius
  • Swaziland
  • Luxembourg
  • Mozambique
  • Namibia
  • Seychelles
  • South Africa
  • Sweden
  • UK
  • Zimbabwe
  • Belgium
  • Lesotho

Market restrictions

Openness to international investors 

Botswana has been lauded for creating an investor friendly environment. In 2014, the country was rated 52th out of 189 countries in the World Bank Ease of Doing Business. The government is engaged in promoting its private sector; a number of measures have already been taken such as the enactment of the Companies Act regulation and the passing of the new Industrial Development Bill.

The Botswana Export and Development Investment Authority (BEDIA) is the institution that is in charge of promoting the local and international competitiveness of the country. The Ministry of Finance is finalizing a new Foreign Direct Investment Strategy.

Foreign investors are given equal access to investment incentive schemes (grants and loans) for medium and large projects provided they partner with a citizen of Botswana. Grants and loans designed for small and medium enterprises (involving less than P 75,000) are however reserved for citizens of Botswana. Foreigners are allowed to engage in any kind of financial investment (bonds or equities); however, they can only trade and issue debentures of over one year.

Capital Controls

Since 2005, the Bank of Botswana (BoB) embraced a strict exchange rate policy. The value of the national currency, the Pula, is maintained within a narrow range from a basket of currencies.

Restrictions on foreign exchange and profit repatriation

Foreign exchange controls were abolished in February 1999. Consequently, any capital or interest can be remitted without limitations or restrictions (subject to availability of foreign currency reserves).

Credit rating

In February 2015, S&P confirmed Botswana foreign long and short-term foreign currency sovereign ratings, with a stable outlook

List of Primary Dealers

The Primary Dealers authorized to operate in Botswana are: