Botswana Approves Further Exchange Rate Measures to Protect Pula and Foreign Reserves

Botswana Approves Further Exchange Rate Measures to Protect Pula and Foreign Reserves. Botswana has approved additional adjustments to its exchange rate framework as part of ongoing efforts to protect foreign exchange reserves and strengthen the competitiveness of the domestic economy.

Under Section 21 of the Bank of Botswana Act, the determination of the external value of the Pula is the responsibility of the President, acting on the recommendation of the Minister of Finance and following consultation with the Bank of Botswana. The Ministry of Finance, working closely with the central bank, regularly reviews the exchange rate policy framework to ensure it continues to meet its objectives for the national economy.

Botswana operates a crawling peg exchange rate system, which remains the country’s primary exchange rate policy instrument. The framework is based on a peg to a basket of currencies, an annual rate of crawl designed to approximate inflation differentials, and trading margins around the central bilateral exchange rates at which the Bank of Botswana conducts foreign currency transactions with commercial banks.

The effectiveness of this framework relies on the availability of adequate foreign exchange reserves to meet market demand at published exchange rates. In July 2025, following sustained pressure on official foreign exchange reserves, authorities implemented key policy adjustments to support the sustainability of the exchange rate regime and maintain market stability. These included increasing the annual downward rate of crawl from 1.51 percent to 2.76 percent and widening trading margins from ±0.5 percent to ±7.5 percent.

According to the authorities, these changes resulted in reduced foreign exchange sales by the Bank of Botswana and encouraged a more market-driven foreign exchange environment. However, official foreign exchange reserves remain constrained.

In response, the President has approved the introduction of asymmetric Pula trading margins, while maintaining the 2.76 percent annual rate of crawl and retaining the 50/50 weighting of the Pula currency basket. The measures are intended to support competitiveness, safeguard foreign exchange reserves, enhance external sustainability, and reinforce the resilience of Botswana’s exchange rate framework.