Pula Overvaluation Poses Long-Term Risk, Warns Finance Minister Gaolathe

Pula Overvaluation Poses Long-Term Risk, Warns Finance Minister Gaolathe. Botswana’s Vice President and Minister of Finance, Ndaba Gaolathe, has issued a cautionary statement in Parliament today, revealing that the Pula is moderately overvalued by 5 to 10%, a position confirmed by joint research conducted with the Bank of Botswana.

Drawing from International Monetary Fund (IMF) valuation frameworks, Gaolathe explained that Botswana’s currency, once sustained by strong diamond exports, now faces pressure amid falling global demand and weakening diamond prices.

“In the past, an overvalued Pula was manageable because diamonds brought in billions in foreign currency,” Gaolathe told lawmakers. “But the market has changed. Today, we are earning significantly less, and the foreign exchange inflows that once protected our reserves have slowed sharply.”

With less foreign currency entering the system, the Bank of Botswana has had to draw from reserves to support the Pula’s value, selling dollars and euros to buy back Pula. This ongoing intervention, Gaolathe warned, is no longer sustainable.

Gaolathe acknowledged public concern over the economic impact, including cost-of-living pressures, but framed the adjustment as a protective policy measure. “This is not about sacrifice for its own sake. It is about preserving the economy’s ability to function without risking a collapse in reserves.”

For Botswana’s business community, the minister’s statement signals a shift in currency management and a likely adjustment in market conditions. Entrepreneurs are advised to monitor foreign exchange trends closely and explore diversification, local sourcing, and export-readiness as buffers against potential currency shifts.