## _cr07227

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### Macroeconomic overview
- Real GDP growth (July–June) strong in 2004/05, rebounding to more than 8 percent; Real GDP (July-June) series: 1.6, 9.5, 3.4, 8.4, 4.2, 4.3 (2001–2006).
- Current account surplus estimated at 15 percent of GDP in 2005; current account (percent of GDP) series: 9.9, 3.3, 5.6, 3.0, 15.4, 10.7 (2001–2006).
- International reserves: equivalent of 21 months of goods and services imports by end-2005; gross official reserves (end of period, millions of U.S. dollars): 5,665; 6,276; 7,207 (selected).
- Non-diamond exports roughly tripled in dollar terms and nearly doubled as a share of GDP between 2001 and 2005.

### Growth composition and sustainability risks
- Diamond sector concentration:
  - Diamond production accounts for about three-fourths of exports, one-third of GDP, and half of government revenue.
  - Real diamond output projected to level off at roughly current production levels for the next decade and a half and decline sharply thereafter.
- Non-mining activity: fell from 66 to 57 percent of GDP in the nine years to 2004/05 (authorities’ diversification efforts had limited success).
- HIV/AIDS: estimated adult prevalence over 35 percent (UNAIDS), posing risks to long-term economic progress and public finances.

### Fiscal position and medium-term fiscal implications
- 2005/06 fiscal outturn:
  - Budget surplus for 2005/06 estimated at more than 8 percent of GDP; staff notes overall surplus in line with projections at 8.5 percent of GDP.
  - Total revenue and grants (percent of GDP): 35.5, 37.0, 38.6, 37.7, 41.2, 39.5 (2001–2006).
  - Total expenditure and net lending (percent of GDP): 38.5, 40.8, 38.9, 36.8, 32.7, 38.1 (2001–2006).
- 2006/07 budget:
  - Calls for a significantly smaller surplus; first quarter 2006/07 implies a surplus at an annual rate of 5 percent of GDP.
  - Staff recommends slowing the pace of expenditure growth below budgeted levels until inflation pressures abate; cites a possible 7 percentage point decline in overall surplus as a strong positive fiscal impulse.
- Medium-term rule and plans (through FY 2008/09 per MTR of NDP 9):
  - Fiscal rule: ceiling on expenditure and target for revenue and grants both at 40 percent of GDP.
  - Authorities intend to increase development expenditure from 25 to 30 percent of total spending by 2008/09.
  - If revenues fall short, intention is to reduce expenditure rather than raise tax rates.
- Post-diamond fiscal adjustment needs:
  - Government revenue from diamond production projected to decline from approximately 20 percent of GDP in recent years to less than 15 percent of GDP by 2010, stabilize roughly at that level, and decline sharply to less than five percent of GDP after 2021.
  - Staff projections imply need for fiscal adjustment in other revenue and expenditure items of at least 13 percent of GDP relative to 2006/07 to maintain balanced budgets after 2021.
  - Substantial fiscal surpluses over the next fifteen years could ease the fiscal shock; increases in tax rates (e.g., VAT rates) might contribute to maintaining overall government expenditures.

### Money, credit, inflation, and exchange rate policy
- Money and credit trends (May 2005–July 2006):
  - Cumulative inflation of 15 percent in the fourteen months between May 2005 and July 2006.
  - Pula-denominated broad money (M3) almost unchanged nominally while foreign currency deposits more than doubled.
  - Real credit to the private sector fell in the last seven months of 2005 and rose in the first seven months of 2006.
  - BoB increased policy interest rates by a cumulative total of one percent since May 2005; nominal interest rates broadly flat; real interest rates negative for most deposit rates.
  - Banking system excess liquidity high; credit to non-government less than commercial banks’ holdings of Bank of Botswana Certificates (BoBCs).
- Inflation dynamics:
  - Consumer price inflation accelerated from 6.3 percent in the 12 months to May 2005 and peaked at 14.2 percent in the 12 months to April 2006.
  - Inflation in the first nine months of 2006 reached 7.8 percent; monthly inflation rates between May and September 2006 equivalent to annual rates in the 7 to 9 percent range.
  - October 2006 monthly outturn 0.6 percent, 12-month rate 9.2 percent (8.4 percent for first ten months of 2006); inflation leveling off at about 8 percent in October 2006, above authorities’ 4 to 7 percent objective for December 2005–December 2006.
- Exchange rate policy:
  - May 2005: shift from a fixed peg against a basket to a crawling peg against a basket comprising the South African rand and the SDR.
  - BoB inflation objectives: 4–7 percent for 2006 and average of a 3–6 percent range for 2006–08; rate of crawl set as the difference between partners’ forecast inflation and Botswana’s inflation objective; weights and rate of crawl not announced.
  - Staff: implied rate of crawl consistent with Botswana’s inflation objective would be two percent a year or less (staff advice also states one or two percent a year in other sections).
  - Real effective exchange rate appreciated since May 2005, offsetting some real effect of the devaluation through September 2006.
- Staff diagnostics and recommendations:
  - Empirical work implies a large role for exchange rate pass-through to prices; monetary aggregates and interest rates play a more limited role.
  - Staff argue authorities should use crawling peg to target the inflation rate rather than the real exchange rate; if targeting inflation, the REER must be allowed to vary.
  - To achieve inflation targets via interest rates would require much more aggressive monetary restraint and a reduction in the rate of crawl.
  - Staff urged announcement of weights and rate of crawl to anchor expectations.

### Structural reforms and labor market issues
- Reform priorities for diversification:
  - Labor market reforms, improving the investment environment, and privatization of parastatals.
- Labor market features and policies:
  - Government accounts for two-fifths of formal sector employment in 2005; central government wages exceeded private sector wages by 62 percent in 2003.
  - Large, relatively well-paid civil service has created reservation wages above market-clearing levels.
  - Government plans: expand vocational training; increase capacity of senior secondary schools; introduce means-tested school fees equal to five percent of secondary school cost; establish a second university focusing on science and technology.
- Investment environment and privatization:
  - Reforms implemented: backlog of work/residence permits eliminated; improvements in company registration, licensing, industrial property, tax system; slower progress on land serviced by utilities.
  - Privatization: BTC privatization approved by Cabinet; Botswana Power Corporation majority privatization may occur via public-private partnership; authorities hope privatization of BTC and Air Botswana by end of next fiscal year.
- Financial sector and AML/CFT:
  - Banking sector relatively well regulated and profitable; limited capacity to supervise NBFIs—comprehensive legislation for a new NBFI regulator being finalized.
  - Draft AML/CFT legislation endorsed by National Task Force, expected to be enacted before year-end.
  - FSAP mission scheduled for early 2007.

### Medium-term scenarios and projections (2006–11 highlights)
- Baseline medium-term scenario:
  - Real GDP (annual percentage change): 4.3 (2006), 4.4 (2007), 4.4 (2008), 3.7 (2009), 3.5 (2010), 3.4 (2011).
  - Non-mining growth projected to remain around 5.7 percent for 2006–08 then moderate.
  - Total revenue and grants (percent of GDP): 39.5 (2006), 37.8 (2007), 37.8 (2008), 36.7 (2009), 35.3 (2010), 35.1 (2011).
  - Mineral revenue (percent of GDP): 18.7 (2006), 18.2 (2007), 17.5 (2008), 16.1 (2009), 14.6 (2010), 14.2 (2011).
  - Overall balance (including grants): 1.4 (2006), 0.0 (2007–2011).
  - Gross official reserves (millions of U.S. dollars; end of period): 7,207 (2006), 7,960 (2007), 8,705 (2008), 9,411 (2009), 9,832 (2010), 10,129 (2011).
  - Reserves (months of imports): 19.5 (2006), 19.8 (2007), 19.9 (2008), 19.6 (2009), 18.7 (2010), 17.6 (2011).
- Alternative medium-term scenario (with structural reforms and fiscal consolidation):
  - Real GDP (annual percentage change): 5.9 (2006), 6.4 (2007), 6.9 (2008), 5.1 (2009), 4.2 (2010), 4.2 (2011).
  - Non-mining: 8.5 (2006), 9.1 (2007), 9.8 (2008), 6.9 (2009), 5.3 (2010), 5.3 (2011).
  - Nominal GDP (in billions of pula): 63.5 (2006), 72.2 (2007), 83.2 (2008), 94.7 (2009), 106.9 (2010), 120.0 (2011).
  - Total revenue and grants (percent of GDP): 39.0 (2006), 36.3 (2007), 35.6 (2008), 34.5 (2009), 33.1 (2010), 32.8 (2011).
  - Mineral revenue (percent of GDP): 18.4 (2006), 17.0 (2007), 15.9 (2008), 14.3 (2009), 12.8 (2010), 12.4 (2011).
  - Gross official reserves (millions of U.S. dollars; end of period): 7,701 (2006), 9,207 (2007), 10,975 (2008), 12,994 (2009), 15,064 (2010), 17,331 (2011).
  - Reserves (months of imports): 22.7 (2006), 24.4 (2007), 26.3 (2008), 28.1 (2009), 29.7 (2010), 31.3 (2011).

### Debt sustainability and external sector metrics
- External debt (percent of GDP): 23.6 (2001), 15.8 (2002), 11.6 (2003), 10.0 (2004), 11.5 (2005), 11.0 (2006), 9.8 (2011).
- Public sector debt (percent of GDP): 8.2 (2001/02), 5.7 (2002/03), 10.7 (2003/04), 9.9 (2004/05), 7.1 (2005/06), 6.0 (2006/07), 2.8 (2011/12).
- External indicators (selected):
  - Exports, f.o.b. (U.S. dollar terms): 2,325; 2,353; 3,035; 3,734; 4,559; 4,707 (2001–2006 sample).
  - Of which diamonds: 1,936; 1,978; 2,374; 2,827; 3,284; 3,367 (2001–2006 sample).
  - Trade balance (millions of U.S. dollar): 713; 710; 900; 840; 1,769; 1,192 (2001–2006).
  - Current account balance (millions of U.S. dollar): 600; 197; 464; 291; 1,565; 1,159 (2001–2006).
  - End-of-year reserves (millions of U.S. dollars): 5,897; 5,474; 5,339; 5,665; 6,276; 7,207 (2001–2006).

### Policy recommendations (staff and Executive Board)
- Monetary and exchange rate policy:
  - Commit to using the crawling peg to target the inflation rate rather than the real exchange rate.
  - Announce weights and rate of crawl to anchor expectations; staff suggests the implied rate of crawl consistent with achieving authorities’ inflation objective would be two percent a year or less (and in other passages one or two percent a year).
  - If interest rates are to be used to rein in inflation, pursue much tighter monetary policy than the cumulative one percent policy rate increase since May 2005.
- Fiscal policy:
  - Maintain fiscal prudence given projected long-term decline in diamond revenue shares; consider putting the share of government expenditure on a sustained downward path.
  - For 2006/07, slow the pace of expenditure growth below budgeted levels until inflationary pressures subside.
  - Use medium-term fiscal surpluses associated with declining expenditure to cushion long-term impact of declining diamond revenues unless alternate revenues are found.
  - Continue efforts to broaden the tax base, improve tax administration, and implement user fees; do not rule out increases in tax rates given the scale of projected decline in diamond revenue.
- Structural reforms:
  - Pursue labor market-related reforms, privatization, and improvements in the investment environment to promote competitiveness and diversification and to reduce unemployment and poverty.
  - Strengthen supervision of NBFIs and finalize AML/CFT legislation.
- Multiple currency practice (MCP):
  - Staff does not recommend approval of the MCP absent additional information indicating conditions for Fund approval apply; Directors urged authorities to take early action to remove the practice.

### Data, statistics, and technical assistance
- Statistical issues:
  - National accounts show implausibly large inventory accumulation over the last five years and anomalies in some deflators; authorities have allocated additional funds to address problems.
  - Planned update to weights in the CPI basket later in the year; monthly inflation data from October 2006 use updated weights.
  - Need for more timely final fiscal accounts data and synchronization between fiscal (April–March), national accounts (July–June), and other calendar year data.
- Technical assistance (selected):
  - MFD, FAD, LEG, STA missions listed across 1997–2006 (e.g., Banking supervision adviser, VAT implementation, BOP statistics, GDDS national accounts missions).
  - March 2006 GDDS mission found problems caused by new computer system solved; timely trade data of acceptable quality being produced; quarterly BOP estimates compiled but not yet disseminated due to consistency/coverage concerns.

### Executive Board assessment (summary)
- Directors commended prudent macroeconomic policymaking, sound management of diamond resources, and good governance.
- Main concerns: accelerated inflation post-May 2005 devaluation, heavy dependence on diamonds, high HIV/AIDS prevalence, and need to adjust fiscal and structural policies for the post-diamond era.
- Directors’ recommendations largely align with staff: prioritize inflation objective in crawling peg settings, announce crawling peg parameters, slow expenditure growth in 2006/07 until inflation abates, reduce size of government and public wage bill while preserving HIV/AIDS-related and development spending, and press forward with structural reforms and financial sector strengthening.

*Source: IMF staff report content in _cr07227 (IMF).*

### Executive Summary ......................................................................................................

### Executive Summary

### Macroeconomic overview
- Botswana’s macroeconomic performance has been generally good over the last two years, with the exception of inflation, which accelerated substantially following the May 2005 devaluation.
- Real GDP growth was strong in 2004/05 (July–June), rebounding to more than 8 percent, mainly due to growth in the mining sector.
- The current account surplus is estimated at 15 percent of GDP in 2005.
- International reserves stood at the equivalent of 21 months of goods and services imports by end-2005.
- Non-diamond exports roughly tripled in dollar terms and nearly doubled as a share of GDP between 2001 and 2005.

### Growth composition and risks to sustainability
- Growth has been fueled by continued increases in diamond production.
- Diamond production accounts for about three-fourths of exports, one-third of GDP, and half of government revenue.
- Real diamond output is projected to level off at roughly current production levels for the next decade and a half and decline sharply thereafter.
- The authorities’ efforts to diversify have had limited success; non-mining activity fell from 66 to 57 percent of GDP in the nine years to 2004/05.
- Continued heavy dependence on diamonds, combined with a very high HIV/AIDS infection rate (estimated by UNAIDS at over 35 percent of the adult population), poses risks to long-term economic progress, human welfare, and public finances.

### Fiscal position and implications
- The budget surplus for 2005/06 is estimated at more than 8 percent of GDP, driven by higher diamond revenues and lower-than-budgeted spending.
- The 2006/07 budget calls for a significantly smaller surplus; the sharp drop in the 2006/07 surplus is due largely to projected expenditure increases.
- First quarter 2006/07 data: revenue-to-GDP ratio broadly in line with first quarter 2005/06; expenditure-to-GDP ratio substantially below the same quarter of 2005/06, implying a surplus for the first quarter of 2006/07 at an annual rate of 5 percent of GDP.
- The large surpluses in 2005/06 are judged a prudent response to the likely long-term decline in diamond revenue shares; however, the projected reduction in the 2006/07 surplus could add to inflationary pressures.

### Monetary and exchange rate policy; inflation dynamics
- In May 2005 Botswana shifted from a fixed peg against a basket to a crawling peg against a basket comprising the South African rand and the SDR.
- According to the 2006 Monetary Policy Statement of the Bank of Botswana, the rate of crawl is set at the difference between the inflation targets and projections of countries in the basket and Botswana’s own inflation objectives of 4–7 percent for 2006 and an average of a 3–6 percent range for the 2006–08 period; these objectives were reaffirmed in the August 2006 Mid-term Review of the Monetary Policy Statement. The weights and the rate of crawl have not been announced.
- Consumer price inflation accelerated from 6.3 percent in the 12 months to May 2005 and peaked at 14.2 percent in the 12 months to April 2006.
- Inflation in the first nine months of 2006 reached 7.8 percent and already exceeds the authorities’ objective of a 4 to 7 percent rate for the December 2005–December 2006 period.
- Monthly inflation rates between May and September 2006 have been equivalent to annual rates in the 7 to 9 percent range.
- Notwithstanding the crawl, the real effective exchange rate appreciated since May 2005, offsetting some of the real effect of the devaluation through September 2006.

### Structural challenges and reform priorities
- Diversification will require substantial structural reforms, notably:
  - Planned reforms in labor markets.
  - Reforms to improve the investment environment and privatization of parastatals.
- High unemployment and poverty rates persist despite past growth; social indicators in some areas lag countries at comparable income levels.
- HIV/AIDS (estimated adult prevalence over 35 percent) will continue to place a burden on human welfare and public finances, complicating long-term development and fiscal planning.

### Policy implications and outlook
- The combination of substantial fiscal surpluses in 2005/06 and a policy shift in exchange rate management provides room to respond to transitional pressures, but careful calibration is needed to avoid fueling inflation.
- Sustaining growth as diamond output plateaus and eventually declines will depend on successful diversification and structural reform implementation.
- Fiscal prudence is warranted given the projected long-term decline in diamond revenue shares; however, planned expenditure increases in 2006/07 will need to be managed to limit inflationary spillovers.

*Source: Executive Summary (Botswana) — IMF staff report.*

### 8.      Money and credit trends have been mixed since May 2005 (Table 5). Real, domestic-

### _cr07227 - 8.      Money and credit trends have been mixed since May 2005 (Table 5). Real, domestic-

### Money and credit trends (May 2005–July 2006)
- Real, domestic-currency money demand appears to have fallen significantly.
- Cumulative inflation of 15 percent in the fourteen months between May 2005 and July 2006.
- Pula-denominated broad money (M3) has been almost unchanged in nominal terms while foreign currency deposits have more than doubled.
- Real credit to the private sector:
  - Fell in the last seven months of 2005.
  - Rose in the first seven months of 2006.
- Interest rates:
  - Remained broadly flat in nominal terms.
  - Real interest rates are now negative for most deposit rates.
  - The BoB increased its policy interest rates by a cumulative total of one percent since May 2005.
- Banking system liquidity and instruments:
  - Banking system excess liquidity is high; credit to non-government is less than the commercial banks’ holdings of Bank of Botswana Certificates (BoBCs).
  - New regulations in early 2006 prohibiting non-banks from purchasing BoBCs resulted in an increase in deposits at commercial banks (included in M2) offset by a decline in BoBCs held by non-banks (included in M3 but not M2).
  - BoBCs are short-term securities issued by the BoB to absorb banking system liquidity and are the main pula-denominated asset available to commercial banks for their excess liquidity.
- Market structure constraints:
  - Absence of organized forward markets in the pula and very thin markets for pula-denominated fixed-income securities that can be held by non-banks make covered interest arbitrage difficult.
  - Prudential limits on banks’ open position constrain taking advantage of interest differentials.

### Monetary and exchange rate policy: diagnosis and policy implications
- Authorities’ assessment of recent inflation:
  - Attributed sharp rise in inflation since May 2005 to administered price increases, introduction of school fees for secondary students, increased fuel costs, and the devaluation.
  - Estimated devaluation contributed about three to four percentage points to 2005 inflation.
- Staff view on determinants of inflation:
  - Exchange rate pass-through is likely to be very high given the large share of imports in consumption.
  - Empirical work by staff implied a large role for the exchange rate in price determination and a more limited role for monetary aggregates and interest rates.
- Authorities’ monetary framework and objectives:
  - Current framework not equivalent to full-fledged inflation targeting; annual inflation objective serves as a nominal anchor.
  - Authorities intend to meet their inflation target by actively regulating demand through interest rate changes.
  - Objective of exchange rate policy: maintain a stable real effective exchange rate (REER) to support international competitiveness and economic diversification.
- Staff critique and trade-offs:
  - It is not possible to independently set the nominal exchange rate path, the inflation rate, and the REER path for a sustained period in Botswana’s context.
  - Adhering to a crawling peg, authorities can target the inflation rate or the real exchange rate, but not both.
  - If targeting the REER, the inflation rate is no longer constrained by a nominal anchor and may destabilize the price level.
  - If targeting inflation, the REER must be allowed to vary.
- Policy implications given structure of CPI:
  - Nearly half of the CPI basket consists of imported goods and less than three-tenths consists of nontradables.
  - To offset import-driven inflation under a crawl that sets imported inflation above the target, a very tight monetary policy would be required to keep nontradable inflation low.
  - Despite the surge in inflation and adoption of a crawling peg, policy interest rates have been increased by only one percent, resulting in significantly lower real interest rates.
  - Consequences observed: accelerated credit growth in the first seven months of 2006; weakened demand for pula-denominated money; surge in foreign currency deposits since May 2005 devaluation.
- Staff recommendations on exchange rate anchoring and crawl:
  - Staff consider an exchange rate anchor appropriate for Botswana given high banking system liquidity and loosened relationships among monetary aggregates and interest rates.
  - Staff urge the authorities to commit to using their crawling peg exchange rate regime to target the inflation rate rather than the real exchange rate.
  - Given partner country inflation targets and projections (i.e., a 3–6 percent target range for South Africa and projections for inflation for industrial countries of about 2–3 percent), the implied rate of crawl consistent with achieving Botswana’s inflation objective would be two percent a year or less.
  - To achieve the authorities’ inflation targets through interest rate management would imply a much more aggressive monetary restraint and a reduction in the rate of crawl.
- Communication and transparency:
  - Staff urged the authorities to announce the weights and rate of crawl for the exchange rate regime to anchor expectations.
  - Authorities acknowledged that uncertainty about crawling peg parameters might engender inflationary expectations and indicated announcement of parameters has been under review.

### Fiscal policy, size of government, and medium-term scenarios
- Fiscal stance and near-term outlook:
  - Authorities have maintained a conservative fiscal stance.
  - The 2006/07 surplus is budgeted to be much smaller than the surplus in 2005/06 due to substantially increased development expenditure and expected slowdown in mineral revenue growth.
  - Staff analysis: surpluses of this size are consistent with a prudent medium-term fiscal position given expected sharp decline in diamond revenue after 2021.
  - Staff suggested slowing the pace of expenditure growth below budgeted levels until evidence that inflation pressures are abating, citing a possible 7 percentage point decline in the overall surplus as a strong positive fiscal impulse.
- Medium-term plans (through FY 2008/09) per Mid-Term Review (MTR) of NDP 9:
  - Fiscal rule sets a ceiling on expenditure and a target for revenue and grants, both at 40 percent of GDP.
  - Additional revenue from user fees and tax administration improvements intended to meet projected revenue target and offset decline in GDP share of revenues and grants from plateauing diamond production.
  - If revenues fall short of the target, intention is to reduce expenditure to maintain a balanced budget rather than raise tax rates.
- Expenditure composition and HIV/AIDS:
  - Authorities intend to increase development expenditure from 25 to 30 percent of total spending by 2008/09.
  - HIV/AIDS-related costs expected to continue to increase; authorities expect international official and private financing will cover some costs.
  - Government provides free anti-retroviral drugs through public health system and support to orphans; health care expenditures more than doubled as a share of GDP between 2000/01 and 2005/06, in substantial part because of HIV/AIDS-related spending.
- Staff view on size of government:
  - Staff broadly agreed with policies but expressed that a contraction of the relative size of government would be desirable and is probably inevitable.
- Scenario results (medium-term 2006-11 baseline and alternative):
  - Scenarios are based on MTR baseline and reform case assumptions.
  - Alternative scenario further assumes central government expenditure declines by one percent of GDP per year annually in addition to structural reforms, resulting in higher growth.
  - Baseline scenario:
    - Expenditure-to-GDP ratio declines due to indexation of wage bill at half the rate of inflation.
    - Revenue-to-GDP ratio declines faster, creating budget deficits or necessitating new revenues to maintain a balanced budget.
    - Maintaining revenue at the 40 percent of GDP objective would require much larger increases in user fees or other non-mineral revenue.
  - Alternative scenario:
    - Declining expenditure-to-GDP ratio together with faster growth are slightly more than enough to keep pace with the declining revenue ratio and eventually lead to small fiscal surpluses.

### Post-diamond era projections and fiscal adjustment needs
- Staff projections on diamond revenue:
  - Government revenue from diamond production projected to decline from approximately 20 percent of GDP in recent years to less than 15 percent of GDP by 2010 and stabilize at roughly that level before declining sharply to less than five percent of GDP after 2021.
- Fiscal adjustment required:
  - Staff projections imply the need for a fiscal adjustment in other revenue and expenditure items of at least 13 percent of GDP relative to 2006/07 to maintain balanced budgets after 2021.
  - Substantial fiscal surpluses over the next fifteen years could ease the fiscal shock associated with the decline in diamond revenue.
  - Given the very large reduction in government expenditure needed over the medium-term to offset declining diamond revenue, increases in tax rates (e.g., VAT rates) might contribute to maintaining overall government expenditures.

### Selected government spending ratios (percent of GDP) — cross-country snapshot (values as presented)
- Botswana:
  - Total government expenditure, 2004: 39
  - Government consumption, 2004: 33
  - Education spending, 2003: 10.6
  - Public Health spending, 2003: 4.6

*Source: Staff report text in _cr07227 (IMF).*

### 21.      The authorities indicated that their economic policies recognize the need to

### _cr07227 - 21.      The authorities indicated that their economic policies recognize the need to

### Adjustment to decline in diamond revenues
- Authorities recognize need to adjust to the decline in diamond revenues and are undertaking diversification efforts in tourism, non-diamond mining, mineral-related manufacturing, and financial services to prepare for depletion of the diamond resource, achieve broad-based development and growth, and reduce unemployment and poverty.
- Buildup of large foreign exchange reserves has been a response to prepare for the post-diamond era.
- Reducing the share of government expenditure in GDP or changes in tax rates could offset some decline in diamond revenues, but authorities intend to rely on broadening the tax base through economic diversification to the maximum extent possible.
- Footnote: The sharp decline in revenue shares after fifteen years reflects both an expected lower yield of diamonds and higher extraction costs as major mines shift from open pit to underground mining. Fiscal implications are discussed in the Selected Issues paper “Are Diamonds Forever?”

### Structural reforms — overview
- Agreement between authorities and staff that sustained improvements in competitiveness and diversification, and associated reductions in unemployment and poverty, will require substantial structural reforms in labor markets, the investment environment, and the role of parastatals.

### Labor markets
- Large and relatively well-paid government civil service in non-professional ranks has created reservation wages above market-clearing levels; government accounts for two-fifths of formal sector employment in 2005 and central government wages exceeded those of the private sector by 62 percent in 2003.
- Botswana does not have stringent institutional or legal labor market rigidities or cash assistance to the unemployed, though sector-specific minimum wages affect some smaller employers.
- Recent public sector pay increase offset only half of the change in the cost of living; that policy is expected to continue for future pay increases.
- Government plans:
  - Expand vocational training.
  - Increase capacity of senior secondary schools (grades 11 and 12), which currently have space for less than two thirds of students graduating from junior secondary schools.
  - Introduce means-tested school fees equal to five percent of secondary school cost to help control education initiative costs.
  - Establish a second university focusing on science and technology to reduce tertiary education costs relative to study abroad.
- Footnote: Labor market issues are discussed in more detail in the Selected Issues paper “Narrow Economy and High Unemployment: Twin Distress in Botswana.”

### Investment environment and privatization
- Authorities implementing reforms; Botswana’s international rankings broadly on par with other upper-middle income countries.
- Backlog of applications for work and residence permits for investors has been eliminated.
- Less progress on investor access to land serviced by utilities due to long times to develop and extend infrastructure to industrial land.
- Improvements noted in expediting company registration, streamlining business licensing, ratifying international agreements on industrial property, and streamlining the tax system, but more work needed.
- Privatization:
  - Privatization has been slower than originally expected.
  - Privatization of Botswana Telecommunications Corporation (BTC) approved by Cabinet.
  - Botswana Power Corporation’s majority privatization may take place in the context of a public-private partnership to create substantial new generating capacity.
  - Authorities hope privatization of BTC and Air Botswana will take place by the end of the next fiscal year.
  - Outsourcing, included in privatization strategy, has progressed more rapidly.

### Business environment indicators (selected points reported)
- The source presents comparative indicators from World Bank, Transparency International, and WEF for multiple countries and aggregates (Upper Middle Income; Sub-Saharan Africa). (Detailed country figures appear in the source table.)

### Financial sector, AML/CFT, and statistics
- Banking sector has been relatively well regulated, supervised, and continues to be profitable.
- Capacity to supervise non-bank financial institutions (NBFIs) has been limited; comprehensive legislation to establish a new regulator for NBFIs is being finalized by government.
- Draft AML/CFT legislation has been endorsed by the National Task Force on AML/CFT and should be enacted before the end of the year.
- FSAP mission scheduled for early 2007 will provide an opportunity for more detailed discussions on the financial sector, including AML/CFT.
- Trade policy developments largely reflect ongoing negotiations: EU–SADC EPA negotiations continue and are complicated by diversity among SADC members; negotiations toward a U.S.–Southern African Customs Union free trade agreement have stalled and both sides agreed to consult on reaching a Trade and Investment Cooperation Agreement instead.
- Economic statistics are generally good and adequate for surveillance, but weaknesses in national accounts have emerged:
  - Recently published data show implausibly large inventory accumulation over the last five years and anomalies in some deflators.
  - Authorities agree these are a serious concern and have allocated additional funds to address the problem.
  - Improvements needed: more timely final fiscal accounts data and synchronization between fiscal (April–March), national accounts (July–June), and other calendar year data.
  - Planned update to weights in the CPI basket later this year is welcomed by staff.

### Staff appraisal — macroeconomic assessment and policy advice
- Macroeconomic performance generally good over the last two years, except inflation which accelerated substantially following the May 2005 devaluation.
- Current level of the exchange rate appears broadly appropriate given strong current account, growing non-diamond exports, and high and stable reserves.
- Crawling peg could provide a basis for a nominal anchor; because Botswana’s inflation targets are very close to targets and projected inflation rates of countries in the basket, the annual rate of crawl needs to be consistent with authorities’ medium-term objective.
  - Specifically, with persisting inflationary pressures, authorities should set the annual rate of crawl at one or two percent a year to improve chances of meeting inflation targets.
  - Announcement of parameters of the regime should increase transparency and help anchor exchange rate and inflation expectations.
- Tension exists between using interest rates/monetary policy to achieve the inflation target and using the crawling peg to target a real effective exchange rate level; staff advice:
  - Give priority to the inflation objective in setting the rate of crawl and avoid trying to achieve a real exchange rate target.
  - Given intent to use interest rates and monetary policy to rein in inflation, a much tighter monetary policy would be needed in present circumstances.
- Fiscal policy:
  - While policy of budget balance is prudent, authorities should consider measures to put the share of government expenditure on a sustained, downward path to anticipate projected decline in diamond revenues.
  - For 2006/07, in view of the large fiscal impulse implied by the budget, authorities should slow the pace of expenditure growth below budgeted levels until inflationary pressures subside.
  - For the medium term, fiscal surpluses associated with a declining expenditure path should be used to cushion the long-term impact of declining diamond revenues unless alternate sources of revenue are found.
  - Efforts to broaden the tax base, improve tax administration, and implement user fees are welcome, but increases in tax rates should not be ruled out given the scale of projected decline in diamond revenue.
- Structural reforms: Authorities’ plans for labor market-related reforms, privatization, and improvements in the investment environment are welcomed and should help promote competitiveness and diversification, and reduce unemployment and poverty.
- Multiple currency practice (MCP):
  - Botswana maintains an MCP relating to exchange rate guarantees on certain loans.
  - Authorities previously indicated the scheme applied only to loans undertaken before October 1990, the last of which would mature in 2006; on that basis the Fund previously approved this MCP.
  - A recent communication from the authorities indicates the loans will be outstanding until 2016.
  - Absent additional information on whether conditions for Fund approval of the MCP apply, staff does not recommend approval of the MCP.

*Source: IMF staff report content provided in the supplied PDF excerpt.*

### 36.      It is proposed that Botswana remain on the standard 12-month consultation cycle.

### _cr07227 - 36.      It is proposed that Botswana remain on the standard 12-month consultation cycle.

### Overview
- Proposal: Botswana remain on the standard 12-month consultation cycle.

### National income and prices (selected annual and twelve-month changes)
- Real GDP (July-June): 1.6, 9.5, 3.4, 8.4, 4.2, 4.3 (2001–2006 series)
- Real GDP (Jan.-Dec.): 5.2, 5.6, 6.3, 5.9, 6.2, 4.2
- Consumer prices (average): 6.6, 8.0, 9.3, 6.9, 8.6, 11.3
- Consumer prices (end of year): 5.7, 10.6, 6.4, 7.8, 11.4, 8.6
- Nominal GDP (in billions of pula): 35.7, 39.5, 42.6, 48.8, 56.7, 62.4

### External sector (goods and exchange rates)
- Exports of goods, f.o.b. (in U.S. dollar terms): -13.3, 1.2, 29.0, 23.0, 22.1, 3.2
  - Of which: diamonds: -13.5, 2.1, 20.0, 19.1, 16.1, 2.6
- Imports of goods, f.o.b. (in U.S. dollar terms): -9.4, 2.0, 29.9, 35.5, -3.6, 26.0
- Terms of trade: -2.1, -10.6, -10.0, -1.6, 2.5, -11.2
- Nominal effective exchange rate (depreciation -) 2/: 4.2, 3.5, 1.6, -7.6, -8.5, ...
- Real effective exchange rate (depreciation -) 2/: 5.1, 2.9, 3.6, -4.8, -4.4, ...
- Nominal exchange rate, avg (in pula per U.S. dollar): 5.9, 6.3, 4.9, 4.6, 5.2, ...
- Nominal exchange rate, eop (in pula per U.S. dollar): 7.0, 5.5, 4.4, 4.3, 5.5, ...

### Central government finance (April–March fiscal series and percent of GDP)
- Total revenue and grants (fiscal series, percent of GDP): -10.3, 13.0, 13.2, 10.5, 26.5, 7.0 (levels in table)  
- Mineral revenue (share of total revenue, percent of GDP): -16.4, 7.2, 8.8, 6.4, 27.2, 3.1
- Total expenditure and net lending (fiscal series): 18.5, 14.9, 3.6, 6.8, 2.9, 29.9
- Central government operations (in millions of pula; 2001/02–2006/07):
  - Total revenue and grants: 12,601; 14,240; 16,119; 17,819; 20,179; 22,535; 24,105 (Rev./Bud./Est./Bud. columns)
  - Total expenditure and net lending: 13,671; 15,710; 16,275; 17,383; 20,454; 17,881; 23,223
  - Primary balance (deficit -): -975; -1,389; 367; 513; 0; 4,971; 1,160
  - Overall surplus or deficit (-): -1,069; -1,471; -157; 437; -275; 4,654; 882
- Fiscal shares of GDP (percent):  
  - Total revenue and grants: 35.5, 37.0, 38.6, 37.7, 41.2, 39.5  
  - Total expenditure and net lending: 38.5, 40.8, 38.9, 36.8, 37.4, 38.1  
  - Overall surplus or deficit (-): -3.0, -3.8, -0.4, 0.9, -0.5, 8.5, 1.4

### Money and banking (levels and growth)
- Net foreign assets (twelve-month change, broad series): 22.7, -27.5, -19.2, 1.1, 40.7, 18.3
- Net domestic assets: -20.4, 35.0, 34.4, 10.3, -71.7, -21.8
  - Net domestic credit: -16.2, 55.8, 64.9, 63.5, -181.3, -115.7
  - Net claims on government: -15.1, 40.6, 35.4, 35.3, -30.0, -41.8
  - Claims on private sector: 11.4, 23.7, 10.7, 17.4, 9.1, 12.0
- Broad money (M3): 27.8, 24.1, 13.2, 11.3, 15.2, 12.9
- Velocity (GDP relative to M3): 2.8, 2.4, 2.4, 2.4, 2.4, 2.4
- Bank rates (selected): Bank of Botswana lending rate: 14.3, 15.3, 14.3, 14.3, 14.5, ...  
  Commercial banks prime lending rate: 15.8, 16.8, 16.3, 15.8, 15.7, ...  
  Deposit rate (88-day notice): 9.8, 10.2, 9.9, 9.9, 9.3, ...

### Investment and savings (percent of GDP and levels)
- Gross investment: 40.4, 40.2, 41.3, 38.7, 31.3, 29.9
  - Public investment: 10.2, 10.6, 10.1, 8.8, 7.9, 9.0
  - Private investment: 30.2, 29.6, 31.1, 29.9, 23.4, 21.0
- Gross national savings: 53.0, 46.9, 44.8, 45.6, 45.4, 44.2
  - Public savings: 14.2, 15.5, 15.4, 15.8, 13.3, 12.1
  - Private savings: 38.8, 31.5, 29.4, 29.8, 32.1, 32.1
- Saving-investment balance: 12.6, 6.7, 3.5, 6.8, 14.1, 14.3

### Balance of payments (2001–2011 table highlights in millions of U.S. dollars)
- Current account balance (2001–2006 sample): 600; 197; 464; 291; 1,565; 1,159
- Trade balance (2001–2006 sample): 713; 710; 900; 840; 1,769; 1,192
  - Exports, f.o.b. (2001–2006 sample): 2,325; 2,353; 3,035; 3,734; 4,559; 4,707
    - Of which diamonds: 1,936; 1,978; 2,374; 2,827; 3,284; 3,367
  - Imports, f.o.b. (2001–2006 sample): -1,611; -1,643; -2,135; -2,893; -2,791; -3,515
- Income (2001–2006): -138; -700; -718; -1,037; -724; -644
  - Investment income (2001–2006): -101; -662; -663; -977; -664; -577
- Capital and Financial Account (2001–2006): -506; -202; -358; -303; -139; -228
  - Financial account (2001–2006): -512; -218; -380; -335; -170; -258
    - Direct investment (2001–2006): -351; 362; 213; 434; 285; 266
    - Portfolio investment 1/: -63; -414; -522; -472; -369; -300
    - Other investment 2/: -99; -165; -70; -297; -86; -224
- Reserve assets (increase -): 421; 424; 135; -327; -610; -931
- End-of-year reserves (selected): 5,897; 5,474; 5,339; 5,665; 6,276; 7,207 (millions of U.S. dollars)
- Current account (percent of GDP) (2001–2006): 9.9, 3.3, 5.6, 3.0, 15.4, 10.7

### Medium-term baseline scenario (Table 7 highlights, percent of GDP unless otherwise indicated)
- Real GDP (annual percentage change): 8.4 (2004), 4.2 (2005), 4.3 (2006), 4.4 (2007), 4.4 (2008), 3.7 (2009), 3.5 (2010), 3.4 (2011)
  - Mining: 18.2, 2.2, 2.3, 2.3, 2.4, 2.4, 2.3, 2.2
  - Non-mining: 1.9, 5.6, 5.7, 5.7, 5.7, 4.6, 4.3, 4.1
- Nominal GDP (in billions of pula): 48.8, 56.7, 62.4, 69.3, 77.6, 86.8, 97.0, 107.7
- Gross national savings: 45.6, 45.4, 44.2, 43.8, 44.3, 44.8, 45.3, 45.7
- Total revenue and grants: 37.7, 41.2, 39.5, 37.8, 37.8, 36.7, 35.3, 35.1
  - Mineral revenue: 18.4, 20.2, 18.7, 18.2, 17.5, 16.1, 14.6, 14.2
- Total expenditure and net lending: 36.8, 32.7, 38.1, 38.1, 37.8, 37.9, 37.3, 36.9
- Overall balance (including grants): 0.9, 8.5, 1.4, 0.0, 0.0, 0.0, 0.0, 0.0
- External current account balance (deficit -): 3.0, 15.4, 10.7, 8.6, 7.6, 6.4, 3.9, 2.9
- Gross official reserves (millions of U.S. dollars; end of period): 5,665; 6,276; 7,207; 7,960; 8,705; 9,411; 9,832; 10,129
- Reserves (in months of imports of goods and services): 18.4, 20.8, 19.5, 19.8, 19.9, 19.6, 18.7, 17.6

### Alternative medium-term scenario (Table 8 highlights)
- Real GDP (annual percentage change): 8.4 (2004), 4.2 (2005), 5.9 (2006), 6.4 (2007), 6.9 (2008), 5.1 (2009), 4.2 (2010), 4.2 (2011)
  - Non-mining: 1.9, 5.6, 8.5, 9.1, 9.8, 6.9, 5.3, 5.3
- Nominal GDP (in billions of pula): 48.8, 56.7, 63.5, 72.2, 83.2, 94.7, 106.9, 120.0
- Gross national savings: 45.6, 45.5, 44.8, 45.6, 47.3, 48.9, 50.4, 51.5
- Total revenue and grants: 37.7, 41.2, 39.0, 36.3, 35.6, 34.5, 33.1, 32.8
  - Mineral revenue: 18.4, 20.2, 18.4, 17.0, 15.9, 14.3, 12.8, 12.4
- Total expenditure and net lending: 36.8, 32.7, 37.6, 36.4, 35.6, 34.7, 33.7, 32.6
- Overall balance (including grants): 0.9, 8.5, 1.4, 0.0, 0.0, 0.0, 0.0, 0.2
- External current account balance (deficit -): 3.0, 15.4, 15.1, 14.4, 14.5, 14.2, 12.9, 12.5
- Gross official reserves (millions of U.S. dollars; end of period): 5,665; 6,283; 7,701; 9,207; 10,975; 12,994; 15,064; 17,331
- Reserves (in months of imports of goods and services): 18.4, 20.8, 22.7, 24.4, 26.3, 28.1, 29.7, 31.3

### Sectoral GDP and income-expenditure aggregates (selected levels and percents)
- GDP at market prices (millions of pula): 34,787; 35,693; 39,478; 42,580; 48,753; 56,700
- Consumption (levels): 14,956; 16,656; 19,303; 21,188; 24,633; 30,878
- Gross investment (levels): 13,710; 14,798; 15,457; 18,401; 16,958; 16,049
- Gross domestic savings (levels): 19,831; 19,038; 20,175; 21,392; 24,120; 25,822
- Sectoral real GDP growth (selected):  
  - Mining: 17.1, -3.4, 10.6, 0.3, 18.2, 2.3  
  - Manufacturing: -0.4, 0.2, 3.1, 0.8, -2.6, 5.0

### Millennium Development Goals (selected indicators)
- Net primary enrollment ratio (percent of relevant age group): 84.9; ...; 78.7; 79.6; 80.9; ...
- Youth literacy rate (percent ages 15–24): ...; ...; ...; 89.1; ...
- Prevalence of child malnutrition (percent of children under 5): ...; 17.2; 12.5; ...
- Prevalence of HIV, female (percent ages 15–24): ...; ...; ...; 38.0; 37.3; 37.3
- Fixed line and mobile telephones (per 1,000 people): 20.6; 35.4; 55.9; 204.4; 371.9; 371.9
- Internet users (per 1,000 people): 0.0; 0.7; 3.3; 15.2; 34.9; ...

*Source: Botswana authorities; and Fund staff estimates and projections.*

### Appendix I: Botswana: Relations with the Fund

### Appendix I: Botswana: Relations with the Fund

### I. Membership
- Status: Joined July 24, 1968; Article VIII

### II. General Resources Account
- Quota: 63.00 SDR(million) — 100.00 percent of Quota
- Fund holdings of currency: 56.77 SDR(million) — 90.11 percent of Quota
- Reserve position in Fund: 6.25 SDR(million) — 9.91 percent of Quota

### III. SDR Department
- Net cumulative allocation: 4.36 SDR(million) — 100.00 percent of Quota
- Holdings: 36.54 SDR(million) — 838.28 percent of Quota

### IV. Outstanding purchases and loans
- None

### V. Financial arrangements
- None

### VI. Project obligations to Fund
- None

### VII. Exchange rate arrangements
- Exchange rate regime: crawling peg arrangement against a basket of currencies.
- As of November 15, 2006:
  - US$1 = P6.21
  - R1 = P0.852 (South African rand to pula)

### VIII. Article IV Consultation
- Last Article IV consultation concluded by the Executive Board on June 22, 2005.
- Multiple currency practice (MCP):
  - MCP relates to exchange rate guarantees on certain loans.
  - Authorities previously indicated scheme applied only to loans undertaken before October 1990, the last of which would mature in 2006; Fund previously approved this MCP on that basis.
  - Recent communication from authorities indicates the loans will be outstanding until 2016.
  - Absent additional information on whether conditions for Fund approval of the MCP apply, staff does not recommend approval of the MCP.
- Executive Board decision in context of 2005 Article IV consultation:
  1. The Fund takes this decision relating to Botswana’s exchange measure subject to Article VIII, Section 3, in the light of the 1999 Article IV consultation with Botswana conducted under Decision No. 5392-(77/63), adopted April 29, 1977, as amended (Surveillance over Exchange Rate Policies).
  2. As described in IMF Country Report No. 06/66, May 13, 2005, Botswana maintained a multiple currency practice subject to Fund approval under Article VIII, Sections 2(a) and 3 arising from the Foreign Exchange Risk-Sharing Scheme (FERS) applicable to outstanding external loans obtained by certain public enterprises before October 1, 1990. In the circumstances of Botswana, the Fund grants approval of the retention of this multiple currency practice until June 30, 2006, or the conclusion of the next Article IV consultation, whichever is earlier.

### IX. Technical assistance assignments/projects
- MFD:
  - 1997 — Central Banking Advisor
  - 1999-2000 — Banking Supervision Advisor
- STA:
  - 1997 — Balance of Payments Advisor

### X. Technical assistance missions
- MFD:
  - January 2001 — Banking supervision advisor
  - February 2001 — Monetary operations
  - December 2001 — MEFMI-Monetary operations
  - August 2002 — Banking supervision, anti-money laundering
  - July 2004 — NBFI supervision
  - August 2004 — Money and banking statistics follow-up
- FAD:
  - November 1997 — Introduction of a value-added-tax (VAT)
  - September 2000 — Implementation of VAT next steps
  - February 2002 — Tax administration (SADC Region)
  - November 2004 — Public expenditure management
- LEG:
  - January 2006 — Review of amended VAT provisions
- STA:
  - May 2001 — Inspection for visit of long-term BOP Advisor
  - April 2002 — ROSC data module
  - July 2002 — BOP statistics: peripatetic visit
  - August 2003 — TA on monetary and financial statistics using the GDDS
  - June 2004 — GDDS project for Anglophone Africa: National accounts statistics
  - August 2004 — Follow-up mission: Money and banking statistics
  - October 2004 — GDDS: National accounts mission
  - June 2005 — Follow-up TA on monetary and financial statistics using the GDDS
  - August 2005 — Follow-up mission: GDDS quarterly balance of payments statistics
  - March 2006 — GDDS project for Anglophone Africa: Balance of payments statistics
  - March-April 2006 — GDDS project for Anglophone Africa: National accounts statistics

*Appendix I: Botswana: Relations with the Fund (As of October 31, 2006).*

### 11.      STA has provided considerable technical assistance to develop quarterly balance of

### _cr07227 - 11.      STA has provided considerable technical assistance to develop quarterly balance of

### Technical assistance and quarterly balance of payments
- "STA has provided considerable technical assistance to develop quarterly balance of payments accounts."
- March 2006 technical assistance mission under the GDDS regional project for Anglophone African countries:
  - Found that "the problems caused by the new computer system have been solved."
  - Found that "timely trade data of what seems to be an acceptable quality are being produced."
- Quarterly balance of payments estimates:
  - "are being compiled but are not yet disseminated as they are not fully consistent with the annual data and there are concerns about coverage."

### Table of common indicators (selected entries, as of July 13, 2006)
- Exchange rates: latest observation Apr. 2006; Date received 5/2/2006; Frequency: M; Frequency of reporting: M; Frequency of publication: M.
- International reserve assets and reserve liabilities of the monetary authorities: latest observation Dec. 2005; Date received [            ]; Frequency: M; Frequency of reporting: M; Frequency of publication: M.
- Reserve/base money: latest observation Jan. 2006; Date received 5/15/2006; Frequency: M; Frequency of reporting: M; Frequency of publication: M; Data quality – methodological soundness: LO, LO, LO, O; Data quality – accuracy and reliability: LO, LO, LO, LO, LO.
- Broad money: latest observation Jan. 2006; Date received 5/15/2006; Frequency: M; Frequency of reporting: M; Frequency of publication: M.
- Central bank balance sheet: latest observation Jan. 2006; Date received 5/15/2006; Frequency: M; Frequency of reporting: M; Frequency of publication: M.
- Consolidated balance sheet of the banking system: latest observation Feb. 2006; Date received 5/5/2006; Frequency: M; Frequency of reporting: M.
- Interest rates: latest observation Mar. 2006; Date received 5/5/2006; Frequency: M; Frequency of reporting: M; Frequency of publication: M.
- Consumer price index: latest observation May 2006; Date received July 2006; Frequency: M; Frequency of reporting: M; Frequency of publication: M; Data quality – methodological soundness: O, LO, LO, O; Data quality – accuracy and reliability: LO, LO, O, O, NA.
- Revenue, expenditure, balance and composition of financing – general government: latest observation NA; Date received NA; Data quality – methodological soundness: LO, LO, LO, LO; Data quality – accuracy and reliability: LO, O, LO, O, NA.
- Revenue, expenditure, balance and composition of financing – central government: latest observation 2002/03; Date received Sep. 2003; Frequency: A/Q; Frequency of reporting: Q; Frequency of publication: Q.
- External current account balance: latest observation 2003; Date received [          ]; Frequency: A; Frequency of reporting: A; Frequency of publication: A; Data quality – methodological soundness: O, LO, LO, O; Data quality – accuracy and reliability: LO, LO, LO, LO, LO.
- Exports and imports of goods and services: latest observation 2005 Q4; Date received April 2006; Frequency: M/Q; Frequency of reporting: M; Frequency of publication: Q.
- GDP/GNP: latest observation 2005 Q4; Date received April 2006; Frequency: A/Q; Frequency of reporting: AM; Frequency of publication: AM; Data quality – methodological soundness: LO, LO, LNO, LO; Data quality – accuracy and reliability: LO, LO, LO, LO, LNO.
- Gross external debt: latest observation Mar. 2003; Date received Mar. 2003; Frequency: A/Q; Frequency of reporting: A; Frequency of publication: A.

### External Debt Sustainability Framework (2001–2011) — key figures and projections
- External debt (percent of GDP) by year:
  - 2001: 23.6
  - 2002: 15.8
  - 2003: 11.6
  - 2004: 10.0
  - 2005: 11.5
  - 2006: 11.0
  - 2007: 10.8
  - 2008: 10.5
  - 2009: 10.2
  - 2010: 10.0
  - 2011: 9.8
  - Debt-stabilizing non-interest current account: -2.3
- Change in external debt:
  - 2001: 1.2
  - 2002: -7.7
  - 2003: -4.2
  - 2004: -1.6
  - 2005: 1.5
  - 2006: -0.5
  - 2007: -0.2
  - 2008: -0.3
  - 2009: -0.3
  - 2010: -0.2
  - 2011: -0.2
- Identified external debt-creating flows (percent of GDP):
  - 2002: -8.6
  - 2003: -15.9
  - 2004: -14.2
  - 2005: -8.1
  - 2006: -19.1
  - 2007: -15.5
  - 2008: -13.1
  - 2009: -12.0
  - 2010: -10.6
  - 2011: -7.8
  - (Aggregate listed as "-" for 2001)
- Current account deficit, excluding interest payments (percent of GDP):
  - 2001: -13.2
  - 2002: -3.7
  - 2003: -5.7
  - 2004: -3.8
  - 2005: -17.1
  - 2006: -11.9
  - 2007: -9.9
  - 2008: -9.0
  - 2009: -7.9
  - 2010: -5.3
  - 2011: -4.2
- Deficit in balance of goods and services (percent of GDP):
  - 2001: -10.7
  - 2002: -9.9
  - 2003: -9.6
  - 2004: -7.5
  - 2005: -18.4
  - 2006: -10.7
  - 2007: -8.5
  - 2008: -7.5
  - 2009: -6.4
  - 2010: -2.9
  - 2011: -1.2
- Exports (percent of GDP):
  - 2001: 53.2
  - 2002: 41.4
  - 2003: 39.9
  - 2004: 42.1
  - 2005: 56.3
  - 2006: 53.3
  - 2007: 52.0
  - 2008: 51.2
  - 2009: 51.0
  - 2010: 48.8
  - 2011: 48.4
- Imports (percent of GDP):
  - 2001: 42.5
  - 2002: 31.5
  - 2003: 30.2
  - 2004: 34.6
  - 2005: 37.9
  - 2006: 42.6
  - 2007: 43.5
  - 2008: 43.7
  - 2009: 44.6
  - 2010: 45.8
  - 2011: 47.2
- Net non-debt creating capital inflows (negative; percent of GDP):
  - 2001: -0.7
  - 2002: -6.0
  - 2003: -4.7
  - 2004: -3.7
  - 2005: -4.2
  - 2006: -3.4
  - 2007: -3.2
  - 2008: -2.9
  - 2009: -2.7
  - 2010: -2.5
  - 2011: -2.4
- Automatic debt dynamics (percent of GDP):
  - 2001: 5.3
  - 2002: -6.2
  - 2003: -3.8
  - 2004: -0.5
  - 2005: 2.2
  - 2006: -0.2
  - 2007: 0.0
  - 2008: -0.1
  - 2009: 0.1
  - 2010: 0.1
  - 2011: 0.1
- Contribution from nominal interest rate (percent of GDP):
  - 2001: 1.3
  - 2002: 0.8
  - 2003: 0.6
  - 2004: 1.1
  - 2005: 0.8
  - 2006: 0.7
  - 2007: 0.7
  - 2008: 0.8
  - 2009: 0.8
  - 2010: 0.7
  - 2011: 0.7
- Contribution from real GDP growth (percent of GDP):
  - 2001: -1.4
  - 2002: -0.9
  - 2003: -0.7
  - 2004: -0.6
  - 2005: -0.7
  - 2006: -0.4
  - 2007: -0.4
  - 2008: -0.4
  - 2009: -0.4
  - 2010: -0.3
  - 2011: -0.3
- Contribution from price and exchange rate changes (percent of GDP):
  - 2001: 5.3
  - 2002: -6.1
  - 2003: -3.7
  - 2004: -1.0
  - 2005: 2.1
  - 2006: -0.5
  - 2007: -0.3
  - 2008: -0.4
  - 2009: -0.3
  - 2010: -0.3
  - 2011: -0.3
- Residual, incl. change in gross foreign assets (2-3) (percent of GDP):
  - 2001: 9.8
  - 2002: 8.2
  - 2003: 9.9
  - 2004: 6.5
  - 2005: 20.6
  - 2006: 15.0
  - 2007: 12.8
  - 2008: 11.7
  - 2009: 10.3
  - 2010: 7.6
  - 2011: 6.3
- External debt-to-exports ratio (in percent):
  - 2001: 44.4
  - 2002: 38.3
  - 2003: 29.2
  - 2004: 23.8
  - 2005: 20.5
  - 2006: 20.7
  - 2007: 20.8
  - 2008: 20.5
  - 2009: 20.1
  - 2010: 20.5
  - 2011: 20.3
- Gross external financing need (in billions of US dollars) 3/ (selected presentation appears concatenated in source):
  - Listed string: 0.10.40.30.7-0.5 0.10.30.50.71.11.3
  - in percent of GDP (selected): 1.7 5.7 3.7 6.9 -4.9 (fragmented in source)

### Key macroeconomic assumptions (historical averages and projections; selected series)
- Real GDP growth (in percent):
  - Historical sequence in table: 5.2, 5.6, 6.3, 5.9, 6.2, 7.1
  - Projected sequence: 1.9, 4.2, 4.3, 4.4, 4.0, 3.6, 3.4, 3.9 (source presents averages/deviations and projections across columns)
- Exchange rate appreciation (US dollar value of local currency, change in percent):
  - Historical sequence: -23.2, 27.7, 23.1, 3.8, -22.3, -5.0
  - Projected entries include: 18.4, 0.1, -1.7, -0.7, -0.7, -0.7, -0.9
- GDP deflator in US dollars (change in percent):
  - Historical sequence: -19.2, 34.9, 30.9, 9.9, -17.5, 1.7
  - Projected entries include: 19.3, 4.3, 2.6, 3.6, 3.3, 2.9, 2.7, 3.0
- Nominal external interest rate (in percent):
  - Historical: 5.1, 5.1, 5.6, 11.0, 6.8, 6.9
  - Projected: 1.7, 6.8, 7.2, 7.6, 8.0, 7.4, 7.5, 7.6
- Growth of exports (US dollar terms, in percent):
  - Historical: -10.8, 6.1, 29.3, 22.0, 19.9, 9.8
  - Projected: 18.0, 2.9, 4.4, 6.6, 6.8, 2.0, 5.4, 5.0
- Growth of imports (US dollar terms, in percent):
  - Historical: -7.9, 1.0, 28.9, 32.4, -1.9, 7.0
  - Projected: 17.0, 22.2, 9.3, 8.7, 9.5, 9.5, 9.3, 9.3
- Current account balance, excluding interest payments (percent of GDP) (values repeated in “Key Macroeconomic Assumptions” table):
  - Historical: 13.2, 3.7, 5.7, 3.8, 17.1, 10.1
  - Projected sequence: 5.0, 11.9, 9.9, 9.0, 7.9, 5.3, 4.2, 7.3
- Net non-debt creating capital inflows (percent of GDP) (values repeated):
  - Historical: 0.7, 6.0, 4.7, 3.7, 4.2, 2.7
  - Projected: 1.9, 3.4, 3.2, 2.9, 2.7, 2.5, 2.4, 2.7

### Alternative scenarios and bound tests (external debt DSA; select outcomes)
- A. Alternative Scenarios:
  - A1. "Key variables are at their historical averages in 2006-10 4/": debt-stabilizing non-interest current account entries include 11.0, 10.7, 9.0, 6.0, 0.2, -6.8, -2.6 (table format in source).
- B. Bound Tests (external debt):
  - B1. "Nominal interest rate is at baseline plus one-half standard deviation": entries include 11.0, 10.9, 10.7, 10.5, 10.4, 10.2, -2.2.
  - B2. "Real GDP growth is at baseline minus one-half standard deviations": entries include 11.0, 11.0, 10.9, 11.0, 11.1, 11.2, -2.3.
  - B3. "Non-interest current account is at baseline minus one-half standard deviations": entries include 11.0, 13.3, 15.5, 17.7, 20.1, 22.5, -2.1.
  - B4. "Combination of B1-B3 using 1/4 standard deviation shocks": entries include 11.0, 12.2, 13.3, 14.5, 15.8, 17.2, -2.1.
  - B5. "One time 30 percent real depreciation in 2007": entries include 11.0, 21.1, 25.1, 28.7, 31.1, 33.1, -3.2.

### Public Sector Debt Sustainability Framework (2001/02–2011/12) — key figures
- Public sector debt (percent of GDP) by year:
  - 2001/02: 8.2
  - 2002/03: 5.7
  - 2003/04: 10.7
  - 2004/05: 9.9
  - 2005/06: 7.1
  - 2006/07: 6.0
  - 2007/08: 5.8
  - 2008/09: 4.0
  - 2009/10: 3.5
  - 2010/11: 3.1
  - 2011/12: 2.8
  - Debt-stabilizing primary balance: -0.2
- Change in public sector debt (percent of GDP):
  - 2001/02: 0.9
  - 2002/03: -2.5
  - 2003/04: 5.0
  - 2004/05: -0.8
  - 2005/06: -2.8
  - 2006/07: -1.1
  - 2007/08: -0.2
  - 2008/09: -1.8
  - 2009/10: -0.5
  - 2010/11: -0.4
  - 2011/12: -0.3
- Identified debt-creating flows (4+7+12) (percent of GDP):
  - 2001/02: 5.0
  - 2002/03: 1.3
  - 2003/04: -1.2
  - 2004/05: -2.3
  - 2005/06: -8.5
  - 2006/07: -1.9
  - 2007/08: -0.3
  - 2008/09: -0.4
  - 2009/10: 0.8
  - 2010/11: 1.6
  - 2011/12: 1.5
- Primary deficit (percent of GDP):
  - 2001/02: 2.7
  - 2002/03: 3.6
  - 2003/04: -0.1
  - 2004/05: -1.6
  - 2005/06: -9.1
  - 2006/07: -1.9
  - 2007/08: 0.1
  - 2008/09: 0.0
  - 2009/10: 1.0
  - 2010/11: 1.9
  - 2011/12: 1.7
- Revenue and grants (percent of GDP):
  - 2001/02: 35.5
  - 2002/03: 37.0
  - 2003/04: 38.6
  - 2004/05: 37.7
  - 2005/06: 41.2
  - 2006/07: 39.5
  - 2007/08: 37.8
  - 2008/09: 37.6
  - 2009/10: 36.7
  - 2010/11: 35.3
  - 2011/12: 35.1
- Primary (noninterest) expenditure (percent of GDP):
  - 2001/02: 38.3
  - 2002/03: 40.6
  - 2003/04: 38.5
  - 2004/05: 36.2
  - 2005/06: 32.1
  - 2006/07: 37.6
  - 2007/08: 37.9
  - 2008/09: 37.7
  - 2009/10: 37.7
  - 2010/11: 37.2
  - 2011/12: 36.8
- Automatic debt dynamics (percent of GDP):
  - 2001/02: 2.3
  - 2002/03: -2.3
  - 2003/04: -1.1
  - 2004/05: -0.8
  - 2005/06: 0.6
  - 2006/07: 0.0
  - 2007/08: -0.4
  - 2008/09: -0.4
  - 2009/10: -0.2
  - 2010/11: -0.2
  - 2011/12: -0.2
- Residual, including asset changes (2-3) (percent of GDP):
  - 2001/02: -4.1
  - 2002/03: -3.9
  - 2003/04: 6.2
  - 2004/05: 1.5
  - 2005/06: 5.7
  - 2006/07: 0.8
  - 2007/08: 0.0
  - 2008/09: -1.4
  - 2009/10: -1.2
  - 2010/11: -2.1
  - 2011/12: -1.8
- Public sector debt-to-revenue ratio (percent):
  - 2001/02: 23.2
  - 2002/03: 15.4
  - 2003/04: 27.9
  - 2004/05: 26.3
  - 2005/06: 17.3
  - 2006/07: 15.2
  - 2007/08: 15.2
  - 2008/09: 10.6
  - 2009/10: 9.6
  - 2010/11: 8.8
  - 2011/12: 8.0
- Gross financing need 5/ (percent of GDP and in billions of U.S. dollars; selected fragments):
  - Percent of GDP series: 3.9, 4.6, 1.0, -0.5, -8.1, -1.1, 0.6, 0.5, 1.4, 2.2, 2.0
  - In billions of U.S. dollars: 0.2, 0.3, 0.1, -0.1, -0.9 (fragmented in source)

### Key macroeconomic and fiscal assumptions (public sector DSA; selected series)
- Real GDP growth (in percent) (historical and projected averages):
  - Historical: 3.3, 7.6, 4.8, 7.2, 5.2, 7.1
  - Projected sequence includes: 2.6, 4.2, 4.3, 4.4, 3.8, 3.6, 3.4, 3.9
- Average nominal interest rate on public debt (in percent):
  - Historical: 3.9, 2.8, 8.8, 7.0, 6.8, 5.2
  - Projected averages include: 1.9, 7.1, 3.3, 3.3, 4.4, 4.5, 3.1, 3.7
- Average real interest rate (nominal rate minus change in GDP deflator, in percent):
  - Historical: 0.4, 1.8, 5.3, 1.6, -3.4, -2.1
  - Projected sequence includes: 5.2, 0.2, -2.9, -3.8, -3.3, -3.5, -4.4, -3.6
- Nominal appreciation (increase in US dollar value of local currency, in percent):
  - Historical: -23.2, 27.7, 23.1, 3.8, -22.3, -5.0
  - Projected entries include: 18.4, -6.1, -0.8, -1.2, -0.7, -0.7, -0.7, -0.8
- Inflation rate (GDP deflator, in percent):
  - Historical: 3.5, 1.0, 3.5, 5.4, 10.2, 7.4
  - Projected sequence includes: 4.9, 6.9, 6.2, 7.1, 7.7, 8.0, 7.5, 7.3
- Growth of real primary spending (deflated by GDP deflator, in percent):
  - Historical: 14.5, 14.0, -0.6, 0.7, -6.6, 6.0
  - Projected entries include: 8.7, 22.2, 5.1, 3.7, 4.0, 2.2, 2.2, 3.4
- Primary deficit (percent of GDP) repeated:
  - Historical and projected: 2.7, 3.6, -0.1, -1.6, -9.1, -2.6, 5.5, -1.9, 0.1, 0.0, 1.0, 1.9, 1.7, 0.9

### Public debt alternative scenarios and bound tests (select entries)
- A. Alternative Scenarios:
  - A1. "Key variables are at their historical averages in 2007/08-11/12  7/": debt-stabilizing primary balance entries include 6.0, 2.9, -1.3, -4.9, -9.0, -12.4, 1.0.
  - A2. "No policy change (constant primary balance) in 2007/08-11/12": entries include 6.0, 3.7, 0.2, -3.0, -6.8, -10.0, 0.7.
- B. Bound Tests (public debt):
  - B1. "Real interest rate is at baseline plus one standard deviations": entries include 6.0, 5.9, 4.2, 3.9, 3.5, 3.3, -0.1.
  - B2. "Real GDP growth is at baseline minus one-half standard deviation": entries include 6.0, 6.3, 5.5, 6.4, 7.6, 9.3, -0.5.
  - B3. "Primary balance is at baseline minus one-half standard deviation": entries include 6.0, 8.5, 9.3, 11.3, 13.1, 14.9, -1.0.
  - B4. "Combination of B1-B3 using one-quarter standard deviation shocks": entries include 6.0, 7.2, 6.8, 7.7, 8.5, 9.3, -0.5.
  - B5. "One time 30 percent real depreciation in 2006/07": entries include 6.0, 7.7, 5.8, 5.2, 4.7, 4.3, -0.3.
  - B6. "10 percent of GDP increase in other debt-creating flows in 2006/07": entries listed as 6.015.813.312.311.310.5 -0.7 (concatenated in source).

### IMF Staff Representative statement (December 13, 2006) — fiscal update
- Fiscal data availability:
  - "Fiscal data for the full 2005/06 fiscal year (April/March) and the first half of the 2006/07 fiscal year have recently become available."
- 2005/06 fiscal outturn:
  - "broadly in line with staff estimates, with revenue and expenditure each roughly one-half percent of GDP lower than projected and the overall surplus in line with projections at 8.5 percent of GDP."
- First half of 2006/07:
  - "For the first half of 2006/07, expenditure is running below budgeted levels and the overall surplus is approximately 3.4 percent of projected full-year GDP."

*Content derived directly from _cr07227 (IMF staff report excerpts and appended DSA tables).*

### 2.      The inflation outturn for October 2006 at 0.6 percent continues recent trends,

### 2.      The inflation outturn for October 2006 at 0.6 percent continues recent trends,

### Inflation developments
- The inflation outturn for October 2006 was 0.6 percent, bringing the twelve month rate to 9.2 percent (8.4 percent for the first ten months of 2006).
- Starting with October 2006, monthly inflation data are calculated with the updated weights in the CPI basket referred to in the staff report (see ¶28 of the staff report).
- Some historical price data have been revised. However, the changes in the weights are minor and the revised series do not change any of the inflation rates referred to in the text of the staff report.
- Coinciding with the May 2005 devaluation and the change to a crawling peg regime, consumer price inflation accelerated from about 6 percent year-on-year to May 2005 and peaked at about 14 percent in April 2006. It began declining and was leveling off at about 8 percent in October 2006, above the authorities’ objective range of 4 to 7 percent inflation for the December 2005-December 2006 period.

### Exchange rate regime and monetary policy
- At the time of the May 2005 devaluation, the authorities announced a shift from an adjustable peg against a basket to a crawling peg against a basket comprising the South African rand and the SDR.
- According to the 2006 Monetary Policy Statement of the Bank of Botswana (BoB), the rate of crawl is set as the difference between Botswana’s inflation objectives (4–7 percent for 2006 and an average of a 3–6 percent range for the 2006-08 period) and forecast average inflation of the trading partner countries. The weights and the rate of crawl have not been announced.
- The real effective exchange rate has appreciated with the increase in inflation, offsetting some of the real effect of the May 2005 devaluation in the period through September 2006.

### Executive Board assessment and key judgments
- Executive Directors commended Botswana’s record of prudent macroeconomic policy making, sound management of diamond resources, and good governance.
- Directors noted that macroeconomic performance has been strong over the last two years, with the exception of inflation, which accelerated substantially, partly due to the May 2005 devaluation and the introduction of a crawling peg.
- The current level of the exchange rate was seen as broadly appropriate in light of the strong current account, growing non-diamond exports, and the high and stable level of reserves.
- Directors cautioned that using interest rates and monetary policy to achieve the inflation target while using the crawling peg to target a real effective exchange rate level could generate conflict among policy objectives.
  - Most Directors recommended that the authorities give priority to meeting their inflation objective in setting the rate of crawl and not seek to achieve a real exchange rate target.
  - Announcement of the parameters of the regime should help to increase transparency and anchor exchange rate and inflation expectations.
  - Given the authorities’ intention to use interest rates and monetary policy to rein in inflation, Directors thought that a tighter monetary policy would be needed if inflation does not soon decline.

### Fiscal policy, diversification, and structural concerns
- Directors considered the authorities’ policy of maintaining a balanced budget to be prudent but recommended measures to put the share of government expenditure on a sustained, downward path to anticipate the projected decline in diamond revenues.
- For 2006/07, in view of the large fiscal impulse implied by the budget, Directors called on the authorities to maintain the pace of expenditure growth below budgeted levels until inflationary pressures subside.
- For the medium term, Directors recommended targeting fiscal surpluses associated with a declining expenditure path.
- Policy priorities recommended by Directors:
  - Reduce the size of government and the public sector wage bill while preserving HIV/AIDS-related and development spending through reallocation from nonpriority areas as well as revenue increases.
  - Continue efforts to broaden the tax base, improve tax administration, and implement user fees; do not rule out increases in tax rates in light of the scale of the projected decline in diamond revenue.
  - Pursue labor market-related reforms, privatization, and improvements in the investment environment to promote competitiveness and diversification.
- Directors welcomed efforts to strengthen supervision of non-bank financial institutions and looked forward to further analysis in the Financial Sector Assessment Program (FSAP) slated for early 2007.
- Directors welcomed the planned adoption of the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) legislation.
- Directors noted that Botswana maintains a multiple currency practice (MCP) relating to exchange rate guarantees on one loan and urged the authorities to take early action to remove the practice.

### Structural challenges highlighted
- Heavy dependence on diamond production: accounts for about three-fourths of exports, one-third of GDP, and half of government revenue.
- Diamond output, which almost doubled over the past decade, is projected to plateau roughly at current production levels for the next decade and a half and decline sharply thereafter.
- Non-mining sectors remain weak, and unemployment and poverty rates remain high; the share of households below the poverty line stood at 30 percent in 2002/03.
- High HIV/AIDS prevalence: UNAIDS estimated at over 35 percent of the adult population, placing a burden on human welfare and public finances.

### Selected economic indicators (as reported)
- Real GDP (change in percent): 2001: 1.6; 2002: 9.5; 2003: 3.4; 2004 Rev.: 8.4; 2005 Prel.: 4.2; 2006 Proj.: 4.3.
- Nonmining GDP (change in percent): 2001: 5.3; 2002: 8.8; 2003: 5.5; 2004 Rev.: 1.9; 2005 Prel.: 5.6; 2006 Proj.: 5.7.
- Consumer prices (period average) (calendar year): 2001: 6.6; 2002: 8.0; 2003: 9.3; 2004 Rev.: 6.9; 2005 Prel.: 8.6; 2006 Proj.: ...
- Investment and savings (percent of GDP) — Gross investment: 2001: 40.4; 2002: 40.2; 2003: 41.3; 2004 Rev.: 38.7; 2005 Prel.: 31.3; 2006 Proj.: 29.9.
  - Public investment: 2001: 10.2; 2002: 10.6; 2003: 10.1; 2004 Rev.: 8.8; 2005 Prel.: 7.9; 2006 Proj.: 9.0.
  - Private investment: 2001: 30.2; 2002: 29.6; 2003: 31.1; 2004 Rev.: 29.9; 2005 Prel.: 23.4; 2006 Proj.: 21.0.
- Gross national savings (percent of GDP): 2001: 53.0; 2002: 46.9; 2003: 44.8; 2004 Rev.: 45.6; 2005 Prel.: 45.4; 2006 Proj.: 44.2.
  - Public savings: 2001: 14.2; 2002: 15.5; 2003: 15.4; 2004 Rev.: 15.8; 2005 Prel.: 13.3; 2006 Proj.: 12.1.
  - Private savings: 2001: 38.8; 2002: 31.5; 2003: 29.4; 2004 Rev.: 29.8; 2005 Prel.: 32.1; 2006 Proj.: 32.1.
- Central government finance (percent of GDP):
  - Total revenue and grants: 2001: 35.5; 2002: 37.0; 2003: 38.6; 2004 Rev.: 37.7; 2005 Prel.: 41.2; 2006 Proj.: 39.5.
  - Total expenditure and net lending: 2001: 38.5; 2002: 40.8; 2003: 38.9; 2004 Rev.: 36.8; 2005 Prel.: 32.7; 2006 Proj.: 38.1.
  - Overall balance (excluding grants): 2001: -3.2; 2002: -4.0; 2003: -0.5; 2004 Rev.: 0.2; 2005 Prel.: 8.1; 2006 Proj.: 0.8.
  - Overall balance (including grants): 2001: -3.0; 2002: -3.8; 2003: -0.4; 2004 Rev.: 0.9; 2005 Prel.: 8.5; 2006 Proj.: 1.4.
  - Primary balance: 2001: -2.7; 2002: -3.6; 2003: 0.1; 2004 Rev.: 1.6; 2005 Prel.: 9.1; 2006 Proj.: 1.9.
  - Total public debt: 2001: 6.9; 2002: 7.8; 2003: 5.3; 2004 Rev.: 4.4; 2005 Prel.: 4.2; 2006 Proj.: 3.6.
- External sector (millions of U.S. dollar) — Trade balance: 2001: 713; 2002: 710; 2003: 900; 2004 Rev.: 840; 2005 Prel.: 1,769; 2006 Proj.: 1,192.
  - Current account balance: 2001: 600; 2002: 197; 2003: 464; 2004 Rev.: 291; 2005 Prel.: 1,565; 2006 Proj.: 1,159.
  - Gross official reserves: 2001: 5,897; 2002: 5,474; 2003: 5,339; 2004 Rev.: 5,665; 2005 Prel.: 6,276; 2006 Proj.: 7,207.
  - Botswana pula per U.S. dollar (period average): 2001: 5.9; 2002: 6.3; 2003: 4.9; 2004 Rev.: 4.6; 2005 Prel.: 5.2; 2006 Proj.: ...
  - Real effective exchange rate (depreciation -): 2001: 5.1; 2002: 2.9; 2003: 3.6; 2004 Rev.: -4.8; 2005 Prel.: -4.4; 2006 Proj.: ...

*Public Information Notice (PIN) No.07/73 — IMF Executive Board Concludes 2006 Article IV Consultation with Botswana (June 28, 2007).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2007/_cr07227.pdf_