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Botswana receives P3billion IMF SDR allocation

The International Monetary Fund (IMF), on Monday, 23 August 2021, triggered its Special Drawing Rights (SDR), allocating a whopping $650 billion to its member countries, the largest by far in history. 

The Special Drawing Rights (SDR) is an international reserve created by, and unit of account of, the IMF to supplement official reserves of member countries of the IMF.

It is neither a currency nor can it be used to make payments. The SDR’s basket of currencies are currently the US dollar, Euro, Chinese Yuan, Japanese Yen, and the Pound Sterling.

The SDR allocation to member countries forms part of the official foreign exchange reserves. A country can choose to convert part or all of its allocation to purchase hard currency (such as United States dollars, Euro, Pound Sterling, Japanese Yen or Chinese Renminbi) and use the funds for budget support.

However, to do so will require the country to agree with another SDR holding country to provide the usable hard currency.

The approval and distribution of the new general Special Drawing Rights equivalent to US$650 billion is proportionate to each member country’s quota in the Fund.

The allocation to countries is rounded off to 95.8 per cent of the quota. Botswana’s quota is SDR197.2 million; therefore, the country’s share is SDR189 million (approximately P3 billion at the SDR/BWP exchange rate on 23 August 2021).

Last Friday, BoB Head of Communications Dr Seamogano Mosanako confirmed to BusinessPost that Botswana has been allocated and received Botswana’s share of the SDRs on 23 August 2021, amounting to SDR 189 million.

The allocation is held at the Bank of Botswana as the designated fiscal agent of Government per the IMF’s Article V, Section 1.

She explained that the allocation is cost-free if SDR holdings remain at par with or above SDRs allocated to the member country.

The financial cost only arises when a country exchanges the allocated SDRs for hard currency to purchase goods and services or any other international payments.

“For example, if Botswana would choose to convert part of its SDR holdings to hard currency, it will pay interest on that difference between the allocation and the remaining holdings, using a predetermined framework by the IMF,” she said.

In 2009, Botswana was allocated SDR 53.1 million. Bank of Botswana said the decision to access the SDR allocations remains the prerogative of the Botswana Government and can be considered alongside other budget financing options.

Last Monday, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), announced that the largest allocation of Special Drawing Rights (SDRs) in history is a significant shot in the arm for the world and, if used wisely, a unique opportunity to combat this unprecedented crisis.

The SDR allocation will provide additional liquidity to the global economic system – supplementing countries’ foreign exchange reserves and reducing their reliance on more expensive domestic or external debt.

The IMF Chief says countries can use the space provided by the SDR allocation to support their economies and step up their fight against the economic crisis induced by the COVID pandemic.

SDRs are being distributed to countries proportionately to their quota shares in the IMF. The decision means about US$275 billion is going to emerging and developing countries, of which low-income countries will receive about US$21 billion – equivalent to as much as 6 per cent of GDP in some cases.

The IMF explained the SDR allocation as a precious resource, the Washington headquartered lender, however, said the decision on how best to use the funds rests with member countries.

“For SDRs to be deployed for the maximum benefit of member countries and the global economy, those decisions should be prudent and well-informed,” advised IMF Chief.

She revealed that to support countries and help ensure transparency and accountability, the IMF provides a framework for assessing the macroeconomic implications of the new allocation, its statistical treatment and governance, and how it might affect debt sustainability.

The IMF will also provide regular updates on all SDR holdings, transactions, and trading – including a follow-up report on the use of SDRs in two years.

“To magnify the benefits of this allocation, the IMF is encouraging voluntary channelling of some SDRs from countries with strong external positions to countries most in need,” she said.

Over the past 16 months, some members have already pledged to lend US$24bn, including US$15 billion from their existing SDRs, to the IMF’s Poverty Reduction and Growth Trust, which provides concessional loans to low-income countries.

Georgieva praised the effort by developed countries to free up their allocation in support of economies that need funds more.

“This is just a start, and the IMF will continue to work with our members to build on this effort,” she said.

She further shared that the IMF is engaging with its member countries on the possibility of a new Resilience and Sustainability Trust, which could use channelled SDRs to help the most vulnerable countries with structural transformation, including confronting climate-related challenges.

In addition, another possibility could be to channel SDRs to support lending by multilateral development banks.

This SDR allocation is a critical component of the IMF’s broader effort to support countries during the pandemic. The SDR allocation includes US$117 billion in new financing for 85 countries, debt service relief for 29 low-income countries, and policy advice and capacity development support to over 175 countries to help secure a strong and more sustainable recovery.

Sub-Saharan Africa’s biggest economies, South Africa and Nigeria will receive SDR 2.924 Billion and SDR 2.353 Billion, respectively. In American Dollar, this translates into $4.148 billion and $3.337 Billion for South Africa & Nigeria.

On Thursday, Minister of Finance and Economic Development Peggy Serame kept mum on Government’s plans following the SDR allocation.

BusinessPost has learnt that with the budget deficit for the financial year 2021/22 having gone up following supplementary budgets and continued pressure on national revenues, the Government is likely to use the allocation for budget support should it decide to trade SDR for hard currency.

Business

Food prices continue to rise, but at a slower rate

28th November 2022

Prices for cereals or staple foods in Botswana and other Southern African countries continue to rise at a slower pace, following trends in the global markets, according to the latest November 2022 Food Price Monitoring and Analysis by Food Agricultural Organization (FAO) of the United Nations.

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Still doing business the old way?

18th November 2022

It’s time to get business done better with MTN Business Botswana’s ICT Solutions.

Running a digital businessMTN Business Solutions Botswana, popularly known as MTN Business is an Internet Service Provider. We are a subsidiary of MTN Group Limited, a multinational telecommunications Group headquartered in South Africa, which operates in 19 markets across Africa and the Middle East.

More and more, clients are looking for ways to keep their staff productive in a dynamically changing business environment. Whether your people are working from home, the office or abroad, there is a growing recognition that digitising your operations can offer unprecedented commercial value in flexibility, productivity and growth. This new, digital reality means that it is more important than ever to stay agile – if there is anything that can slow a business down, it is being burdened by othatld technology.

Having made substantial investments in fibre technology, high-speed terrestrial and undersea networks and new frequency spectrum across the markets wherein it operates, MTN is perfectly positioned to respond to this shift in the market.

A few years ago, MTN also made the decision to build an IP capable radio network for its mobile services, giving its core network the ability to seamlessly integrate with enterprise IP networks. The mobile towers deliver services to enterprise clients absolutely anywhere it has a network, shortening the last mile and removing complexity and cost.

Now there is increasing demand from clients to connect their remote sites in all areas, including rural and semi- rural. MTN has assisted clients with overcoming this connectivity hurdle, enabling their staff to get the job done wherever they are.
MTN’s evolution

For MTN, the focus has shifted from just being a core telecommunications services provider, towards also becoming a technology solutions provider. The service offering now also includes Unified Communications, Data Hosting and Cloud Solutions, Security-As-A-Service and Managed Network Services. The scope has changed to being client and industry specific, so the requirements and service portfolio vary from one client to the next. The expectation is that a company like MTN must respond to these challenges, helping clients to get business done better as they shift from old to new technologies.

As many businesses continue to grapple with a digitally dynamic world, they face new challenges that have to be solved. This environment will benefit those that are more digitally enabled and agile. It is a brave new world that will favour online over on-site, wireless over wired and fluid over formulaic. Businesses will seek out partners and suppliers that are every bit as flexible and forward-looking as they are.
Ultimately, clients need partners like MTN Business that will invest in infrastructure, deliver the services they require, have market credibility, are financially sound and have a long-term commitment to their market presence.

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BIE to vitalize the Dignity of Engineers

9th November 2022

Botswana Institution Of Engineers (BIE), has last week hosted a gala dinner in  which they appreciated engineers who worked tirelessly and with dedication for 10 years from 1983 to steer the BIE to its current status.

The event that was held at the Phakalane Golf Estate had brought together young, experienced and veteran engineers and was held under the theme “Vitalize the dignity and eminence of all professional engineers”.

Explaining the theme, the institution’s treasurer, Thanabalasingam Raveendran said that engineers were looked upon reverentially with respect as the educated but with time it seems to have deteriorated. He indicated that there is a need to change the narrative by all means.

“The BIE exists for the welfare and the betterment of us Botswana engineers, we need to recognize specialised units within our Institution. We Engineers strongly believe in Engineers make it happen” Raveendran said.

He indicated that under the theme they appeal to all engineers to energize, to attain quality of being worthy of honour and respect and to achieve recognized superiority amongst the Society.

Raveendran stated that engineers need to ensure their end product is of good quality satisfying the end users expectations and engineers must be honest in their work.

“Approximately 8000 engineers registered with Engineering Regulatory Board (ERB) are not members of the BIE, engineers need to make every effort to recruit them to BIE” he said.

He alluded that BIE being a society, it currently needs to upgrade itself at par with professional institutions elsewhere like the UK and USA.

He further stated that BIE has to have engineering units of specialised disciplines like Civil/Mechanical/electrical etc

“As President Masisi indicated in his inaugural speech, the young people, who make 60 percent of the population of this country, are the future leaders and therefore investing in them is building the bridge to the future” said Raveendran

Kandima indicated that BIE has a memorandum of Understanding with Engineers Registration Board (ERB), where BIE is a recognised provider of CPD training, mentorship programmes and more importantly IPD undertaking to upgrade the skills and know-how of our engineers.

“For us to achieve our mandate and make worthwhile changes to engineering in Botswana, we have to be totally focused and act with intent” said Kandima.

Furthermore, Stephen Williams, past president of the BIE from 1986-1988 told the engineers that  the BIE provides a fertile environment where they can meet, share ideas and grow professionally.

“The BIE is also a nesting place for graduate engineers to learn from their peers and seniors, it also cater for engineering technicians and technologists and so nobody in the technology field is left out” he said.

He further indicated that Botswana Government provides a conductive environment for growth of engineering professionals.

“It must be stated that the Botswana Government recognises the existence of BIE and it can further be stated that the government enables ERB to carry out its mandate as a regulator of engineering professionals” said Williams

He plead with engineering companies to recognize and support BIE as it is the only source of engineering personnel’s for various Industries .

Furthermore, when giving his farewell speech, Michael Pinard , a past president of the institution  said how they are viewed as engineers by the general public might be due to some lack of appreciation as to exactly what role they play in the development of the country.

“The BIE slogan is aptly coined-Engineers make it happen, in other words, what man dreams engineers create” Said Pinard.

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