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Too early to judge new P10 Polymer banknote – BoB

Bank of Botswana (BoB) has stated that it is too early to judge the quality of the new P10 Polymer banknote as poor.On February 1, 2018, the Bank of Botswana issued a new P10 polymer banknote into circulation.

BoB took the decision in response to persistent public concerns regarding the poor quality of the old circulating P10 paper banknote. However, a year later, there have been public concerns that  the new polymer banknote like its predecessor is of poor quality as it fades quickly and cannot be dispensed by some on banks Automatic Teller Machines (ATMs.)

BoB Communications Manager Mareledi Selabe explained in a response to questions that BoB is aware of public concerns regarding the manner in which the P10 polymer banknote fades as it gets older and stays longer in circulation, particularly the fading of the print at the back of the banknote.  

However, she stated that the condition is caused by mishandling of the banknote by the public, not it's quality. She stated: “This mainly results from the improper handling of the banknote; public education campaigns continue to be carried out to sensitize members of the public on proper handling.”  She said, furthermore, the Bank has engaged commercial banks, large retail shops and wholesalers to ensure a wider distribution of the banknote and the return of soiled banknotes to the Bank for sorting and, where appropriate and necessary, destruction.

She said as the Agency with sole right and authority to procure the printing of banknotes and the minting of coin denominated in Pula and thebe, the BoB has overall responsibility to maintain public confidence in the national currency; issue into circulation banknotes of good quality and of such denominations, composition and form to adequately meet the demands of the economy of Botswana.

According to Selabe, the P10 Polymer banknote was issued to improve the circulation life of the P10 banknote and, also, benefit from the polymer substrate to enhance certain security features of the banknote. She said It was expected that, as had been shown by the experience and evidence in other jurisdictions where polymer banknotes are widely used, that if properly handled, the polymer P10 banknote can last for a period 3 to  4 times that of the paper banknote. The longevity also, over time, results in lower costs of currency procurement and the associated reduction in environmental impact.

Selabe says notwithstanding the evidence from elsewhere, it is considered early to make an informed determination regarding the extent to which this objective has been achieved citing  a number of factors. “First, only a few of the P10 banknotes were actually issued into circulation because of commercial banks not using ATMs to dispense them.

Second, as the smallest banknote denomination, the P10 banknote is used as change by retail outlets and many traders and/or members of the public may hold onto it , and not return the soiled banknotes  to the Bank  for sorting and destruction, as may be necessary. Third, having been launched into circulation on February 1, 2018, the banknote is still relatively new in circulation for a conclusive evaluation on its performance in the Botswana environment. However, the Bank continues to monitor its acceptance and performance. “

Asked if there is any likelihood of the banknote being replaced, she reaffirmed the response that it is too early to make an informed determination on the performance of the polymer banknote. However, the Bank continues to monitor its performance and necessary steps will be taken to ensure that appropriate quality banknotes are in circulation adding they expect the P10 polymer banknote to last longer than the cotton substrate and be more cost-effective.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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