Bank of Botswana
Mr. Moses Dinekere Pelaelo
|Headquarters Gaborone, Botswana|
|Currency Pula - BWP (ISO Code)|
The establishment of the Bank of Botswana followed a decision to withdraw from the Rand Monetary Area (RMA) under which the South African rand had been the legal currency in Botswana since independence in 1966. Anticipating that negotiations for a new RMA agreement that was more favourable to the smaller members (Botswana, Lesotho, and Swaziland) would be problematic, in 1973 Sir Seretse Khama, the President of Botswana, appointed a Monetary Preparatory Commission. The commission was chaired by Mr H.C.L. Hermans, then the Permanent Secretary, Ministry of Finance and Development Planning. The decision to withdraw from the RMA was announced by President Khama in September 1974.
This was despite advice against such a move, including from the International Monetary Fund (IMF), which stressed the vulnerabilities faced by a small, open economy that could not easily afford to maintain reserves sufficient to counter economic and financial volatilities. Nonetheless, the authorities believed that such costs were outweighed by the expected benefits to national development of expanding the range of domestic financial institutions and instruments. Ultimately, the decision to withdraw from the RMA was due not so much to the difficulties in the negotiations (which were successfully concluded between the other members in December 1974) but to the opportunity it provided to pursue independent economic strategies that were already constrained both by the heavy dependency on aid and membership of the Southern African Customs Union (SACU).
In April 1975, the Bank of Botswana and Financial Institutions bills were passed to legislate, respectively, for the establishment of a central bank and the framework to govern financial institutions that would fall under its supervision. The Bank of Botswana was formally established in July 1975, with Mr Hermans as the first Governor.
The first two years were a period of intensive institution building. As well as recruiting staff and securing premises, having decided to leave the RMA it was essential for the Botswana authorities to address and resolve a number of policy issues related to the introduction of a national currency and the establishment of a central bank, including the existing commercial banks that were now locally incorporated. The four most immediate of these issues concerned the characteristics of the new national currency, the exchange rate regime, domestic interest rates and the development and supervision of domestic financial institutions.
The Bank launched the national currency, the Pula, on August 23, 1976 (Pula day), to replace the rand. The rand exchanged for the Pula was credited to Botswana by the South African Reserve Bank, forming the basis of the country's foreign exchange reserves.
The mission of the Bank of Botswana is to contribute to the sound economic and financial well-being of the country. The Bank seeks to promote and maintain:
- monetary stability;
- a safe, sound and stable financial system;
- an efficient payments mechanism;
- public confidence in the national currency;
- sound international financial relations;
and to provide:
- efficient banking services to its various clients; and
- sound economic and financial advice to Government.
As set out in the Bank of Botswana Act (Cap 55:01, section 4), the Bank has the following principal objectives:
- (a)first and foremost to promote and maintain monetary stability, an efficient payments mechanism and the liquidity, solvency and proper functioning of a soundly based monetary, credit and financial system in Botswana;
- (b)secondly, in so far as it is not inconsistent with the objectives set out in paragraph (a), to foster monetary, credit and financial conditions conducive to the orderly, balanced and sustained economic development of Botswana; and
- (c)thirdly, to assist insofar as it is not inconsistent with the objectives as set out in paragraphs (a) and (b), in the attainment of national economic development goals.