Exchange Rate Assessment in a Resource-Dependent Economy: The Case of Botswana
IMF Working Papers, March 1, 2008
Source details
- Canonical URL
- Exchange Rate Assessment in a Resource-Dependent Economy: The Case of Botswana
Other formats
Bibliographic details
- Authors: Corinne C Delechat, Matthew Gaertner
- Published: March 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451869446.001
Summary of approach
- Combines various methodologies to assess the level of the exchange rate in Botswana, explicitly taking into account the implications of its dependency on diamond exports.
- Real exchange rate estimation and projected external balances are evaluated together to assess consistency with long-term external sustainability.
Key findings
- Real exchange rate estimation indicates that, after a period of overvaluation, Botswana's real effective exchange rate is now broadly in line with economic fundamentals.
- The projected current account path is consistent with external sustainability, defined to ensure sufficient savings of diamond wealth in order to maintain a stable import and consumption path through 2050.
- Sustaining consumption over the longer term will require addressing obstacles to non-diamond exports' competitiveness.
Policy implications and recommendations
- Preserve sufficient savings of diamond wealth to maintain a stable import and consumption path through 2050.
- Strengthen policies and reforms to improve the competitiveness of non-diamond exports to sustain consumption and diversification over the longer term.
Subjects and keywords (as provided)
- Subjects: Current account, Exchange rates, Exports, Real effective exchange rates, Real exchange rates
- Keywords: exchange rate, GDP, REER, WP
Source: Exchange Rate Assessment in a Resource-Dependent Economy: The Case of Botswana (IMF Working Paper by Corinne C Delechat and Matthew Gaertner, March 1, 2008).