BOTSWANA: Domestic Bond Market Development
High-Level Summary Technical Assistance Reports, March 17, 2023
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Bibliographic details
- Authors: Trevor A Lessard, Laszlo Buzas, Bill Northfield
- Published: March 17, 2023
- Series: High-Level Summary Technical Assistance Reports
- DOI: https://doi.org/10.5089/9798400235467.029
Executive summary
- The report is a high-level summary technical assistance report focused on Botswana’s domestic bond market development.
- The implementation of a new monetary policy framework to support the Bank of Botswana’s (BoB) inflation targeting regime is described as a welcome development for domestic debt market development.
- There is significant scope to make progress on the authorities’ goal to shift funding from nonconcessional external borrowing to the domestic bond market.
- Measures to develop the domestic debt market are likely to result temporarily in higher funding costs, but this is framed as a necessary investment that will likely be counterbalanced by lower financing costs in the medium-to-long term.
Key findings and analysis
- Coordination between debt management and liquidity management should be enhanced to facilitate the expansion of the domestic debt market.
- Material improvements in the secondary market will take more time to bear fruit; efforts to improve the secondary market should be sequenced after foundational building blocks are operating more efficiently.
- The new monetary policy framework supporting the BoB’s inflation targeting regime is an important enabling factor for domestic debt market development.
- Shifting funding away from nonconcessional external borrowing toward the domestic bond market is a central policy objective highlighted by the authorities.
Policy recommendations and sequencing
- Enhance coordination between debt management and liquidity management to support market development.
- Prioritize foundational market infrastructure and operational efficiency before intensifying efforts to develop the secondary market.
- Accept temporary increases in funding costs as part of the investment required to develop the domestic debt market, with the expectation of lower financing costs over the medium-to-long term.
Observations on market implications
- The report emphasizes that material secondary market improvements are a longer-term outcome and should follow improvements in more foundational market elements.
- The transition toward domestic financing from external nonconcessional borrowing is presented as feasible with appropriate policy and operational adjustments.
Source: BOTSWANA: Domestic Bond Market Development, High-Level Summary Technical Assistance Report No. 2023/002 (March 17, 2023).
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- High-Level Summary Technical Assistance Report — Botswana Domestic Bond Market Development