[2008-05-07]  Pula continues to trade mixed
During April, the Pula appreciated against most major trading partner currencies except the Rand, a bank of Botswana report shows.

The Pula appreciated by 4.5 percent against the Euro and the pound sterling, 7.4 percent against the Yen and 3.2 percent against the US Dollar.

It depreciated by 3.1 percent against the Rand. In contrast, the Rula depreciated against all currencies except the band on an annual basis. The largest annual depreciation was 16.3 percent against the Yen while the least was 2.3 percent against the Pound. Despite the fall in April, the Pula has made a firm 8 percent gain against the Rand on a year-to-date basis on the back of the continued fall of the South African currency on the international foreign exchange market.

The development is a reversal of the trend that has been there in past years as the Pula continuously lost value against the Rand and all other major trading partner currencies except the US Dollar due to Botswana's crawling peg exchange rate regime. But since January, the Pula started to lose ground against all other major currencies, falling by 9.5 percent against the US Dollar. It took 88 thebe to buy a Rand, but the figure has now fallen to approximately 82 thebe last December. On the other hand, the US Dollar rate has risen from P5.98 to P6.63 over the same period.

Although economic commentators have always called for a regime such as this where the Pula appreciates against the country and depreciates against the US Dollar on the assumption that it will cut our import bill from South Africa and increase our revenues which are US Dollar based, other economists have tended to differ with this position.

Speaking to Mmegi in an earlier interview, renowned economist Keith Jefferies said the simplified deduction that the weakening of the Rand will work in our favour is not exactly true because a weaker Rand means higher inflation in South Africa, which means we will end up importing the inflation.

As in South Africa, inflation in Botswana has been on an upward trend since the second half of 2007, mainly due to higher energy and food prices.

Jefferies believes the ideal situation would be for the currency to be stable so that businesses can plan properly rather than for the currencies to continuously fluctuate.


Source: © MMEGI 2002 - 2008