Botswana just made a major move with its money that has economists talking. The African nation decided to let its pula currency lose value much faster than before. Officials announced the pula will drop 2.76 percent over the next twelve months. The government had previously planned a much smaller decline of just 1.51 percent back in December. The change comes as the country faces serious economic trouble from falling diamond sales around the world.
Diamond prices have been crashing for months and Botswana depends heavily on the gems for income. The economy actually shrank by 3 percent last year and might shrink again before things get better. President Duma Boko gave his approval for the currency change after finance officials warned about problems ahead. The government reviews its exchange rate twice each year and adjusts the pula against other currencies like the South African rand. Officials hope the weaker currency will make local products cheaper and more attractive to buyers.
The country has been burning through its foreign money reserves at an alarming rate. Botswana used to keep enough foreign cash to cover more than ten months of imports but that safety net has been disappearing since 2018. Reserves hit a record low of just 5.2 months worth of imports back in February. Finance ministry official Sayed Timuno told reporters the declining reserves could threaten the whole currency system. Another review of the pula will happen at the end of the year.
Diamond prices have been crashing for months and Botswana depends heavily on the gems for income. The economy actually shrank by 3 percent last year and might shrink again before things get better. President Duma Boko gave his approval for the currency change after finance officials warned about problems ahead. The government reviews its exchange rate twice each year and adjusts the pula against other currencies like the South African rand. Officials hope the weaker currency will make local products cheaper and more attractive to buyers.
The country has been burning through its foreign money reserves at an alarming rate. Botswana used to keep enough foreign cash to cover more than ten months of imports but that safety net has been disappearing since 2018. Reserves hit a record low of just 5.2 months worth of imports back in February. Finance ministry official Sayed Timuno told reporters the declining reserves could threaten the whole currency system. Another review of the pula will happen at the end of the year.
