- The "sensational" devaluation of Botswana's pula by 12 percent "leaves more questions than answers," argues the editor of 'Mmegi', Botswana's leading independent newspaper. While the government aims at promoting exports and cutting imports as the economy is detracting, Batswana consumers will again pay the bill through hiking prices.
Botswana's authorities are at it again. The trio of President Festus Mogae, Finance Minister Baledzi Gaolathe and Bank of Botswana governor, Linah Mohohlo have pulled yet another sensational stunt in the form of a 12 percent currency devaluation of the national currency, the pula.
The Batswana people is told the purpose is in the best interests of the nation. The aim is to substitute imports, promote exports, and to maintain a stable and competitive exchange rate.
The same glossy but flimsy reasons were advanced last year, when government cut the worth of the pula by 7.5 percent - but the results turned otherwise. National price increases realised a two percent increment as a result and the people has not yet been told how the 7.5 percent devaluation added value to import substitution and export earnings.
Suspicions that government was devaluing to cover an impending budget deficit caused by a salary increment seems to be gaining legitimacy.
This time around, the reasons advanced for the devaluation are taken with a pinch of salt - justifiably or unjustifiably. Some quarters are already arguing that the 12 percent cut-down effectuated on Sunday is an acknowledgement on the part of government that it is fast losing the grip on economic diversification.
It is a fact that the life-blood of Botswana's economy is mineral revenues - specifically diamond earnings - which are denominated in US dollars. It is also a fact that after 2002, average diamond sales exchange rate is declining. By last year, the country's leading diamond miner Debswana lost pula 5 million, blaming it on the strong pula.
It is also a fact that Botswana's Gross Domestic Product (GDP) has been declining. In his budget speech this year, Finance Minister Gaolathe predicted further tumbles in the next few years.
These could as well be the real reasons why Minister Gaolathe devalued the pula - in order to cover his back again by cashing in more US Dollar for a less valuable Pula. But what is the cost?
Retailers all over Botswana were already on Monday competing to pass the pain on the innocent consumers by hiking prices. Just like the previous devaluation, it is the ordinary man at the tail end of the economy who is bound to endure the suffering.
The action by the Gaberone government is seriously suspicious and desperate. Curiously the latest devaluation came just ahead of today's date for the maturity of a government bond. Why devalue ahead of a bond that is maturing today and by a fat 12 percent margin?
If the 'crawling peg' exchange system has been introduced to continuously monitor the value of the pula, why then an alarming 12 percent devaluation? More questions than answers?
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