BoB pays gov’t P2.9bn windfall
The Bank of Botswana (BoB) has paid the government a timely P2.9 billion return, being the proceeds of the central bank’s investment activities in 2020, BusinessWeek has learnt.
The BoB paid government P848 million as a pre-set dividend and about P2.1 billion as residual income arising from investment activities, helping government coffers at a time when a P6 billion deficit is projected for this year.
Government, as the BoB’s sole shareholder, has an agreement with the central bank under which it receives a pre-set dividend determined by the balances of the Government Investment Account (GIA) and residual income from investment activities.
BoB chief financial officer, Daniel Loeto noted that the bank’s net income reached P8.8 billion last year, compared to P6.9 billion in 2019. The distribution or return to the government, however, declined from P4.1 billion to P2.9 billion due to unrealised gains that are not distributable to the shareholder. The higher income last year was associated with net currency gains of
P2.9 billion in 2020, compared to losses of P752 million in 2019, as a result of the pula’s movement against hard currencies such as the dollar.
“The bank follows international financial reporting standards and we, therefore, include currency and market gains in our statements but these are not distributable,” he told a media briefing on Tuesday.
The bank earned P1.3 billion in interest and dividends in 2020, compared to P1.8 billion the previous year, while interest costs declined to P111.3 million from P161.8 million over the same period.
The BoB officials revealed that the GIA, which houses government’s portion of the foreign reserves, had declined further to P3.4 billion as at June 24, 2021 after improving to P4.9 billion in March from P3.3 billion at the end of last year.
The GIA, which measured P14.4 billion at the end of 2019, has been depleted mainly by drawdowns by the government to cover COVID-19 spending last year, as other sources of budget funding such as mineral revenues declined due to the pandemic’s effects. BoB governor, Moses Pelaelo said the economy was at a critical juncture where the mineral-led and public sector-led growth model could no longer generate sufficient growth. He said average growth rates of at least an average of eight percent per annum over the next 15 years would be required to address the current development imperatives.
“Therefore, there is an urgent need to diversify sources of growth, including redesigning the country’s industrial and trade policies to promote exports in non-traditional sectors, the attraction of foreign direct investment specifically targeted and linked to integration into regional and global production value chains and strengthening export and investment promotion agencies,” he said. Pelaelo added the pace and scale of industrialisation would need to be accelerated in order to generate a diversified economic base and exports, while import substitution efforts required performance incentives with an overall goal of boosting the international competitiveness of local firms.
“Comparative country studies and experiences suggest that deliberate promotion of large-scale industries and dedicated implementation of industrialisation policies are instrumental to a successful escape from the middle-income trap and transition to high-income status,” he said.