Local finance system remains resilient despite uncertainties

The Financial Stability Committee ( FSC) has observed that the country’s financial system continues to be resilient, despite the adverse effects of COVID- 19.

The commit te e consists of the Ministry of Finance and Economic Development ( MFED), Bank of Botswana ( BoB), Non- bank Financial Institutions Regulatory Authority ( NBFIRA), and Financial Intelligence Agency ( FIA).

In its latest report issued through the reserve bank, the Committee said the financial system is characterized by strong capital and liquidity buffers and remains profitable, adaptive and innovative.

In addition, the FSC says vulnerabilities that could elevate risks to financial stability have been contained. This is despite some of the pre- existing financial stability vulnerabilities for Botswana, which include extensive exposure to, and over- reliance of the economy on the external sector and government, and narrow economic base due to lack of economic diversification, hence lower resilience to shocks.

However, FSC warns the financial system is not out of the woods yet, citing the economy’s heavy reliance on mining and tourism, the protracted COVID- 19 pandemic, challenges with the vaccine rollout and maintenance of movement restrictions.

“It was observed that this could have an adverse impact on export receipts, fiscal position, and economic performance broadly, that can translate to the weakening of the financial sector.”

Meanwhile, authorities are also working on the financial markets infrastructures ( FMIs) and regulatory developments which have a bearing on the efficient functioning of the financial services sector.

Projects on the pipeline include the revision of the Non- bank Financial Institutions Regulatory Authority Act and the Financial Intelligence Act, drafting of the Credit Information Bill and the Secured Transaction on Movable Property Bill, which will provide for the establishment of the Collateral Registry.

Other ongoing policy discussions and work include the establishment of a Deposit Protection Fund ( DPF) for Botswana.

“In addition, the domestic supervisory authorities continue to embrace financial technologies through policy support for market developments and regulatory adaptation to ensure orderly business conduct, consumer protection and maintenance of financial system integrity,” said FSC.

Though Botswana remains on the Financial Action Task Force list of jurisdictions with strategic AML/ CFT Anti- Money Laundering/ Combating the Financing of Terrorism/ Counter deficiencies, authorities continue to implement the required action plans.

“Therefore, the likelihood of elevated risk to financial stability due to ongoing strategic AML/ CFT deficiencies is expected to recede going forward,” said FSC.