Favourable credit rating awarded

Botswana has been awarded a “favourable investment rating” by Moody’s, an international ratings agency, the Economist Intelligence Unit (EIU) said in an update this week. The rating was one of the highest given to an African country.
The EIU said that in preparing the rating Moody’s would have taken account of the fiscal situation and the level of reserves- both of which were “exemplary” - as well as other economic fundamentals, such as exchange-rate volatility, inflation, credit growth and default rates. All of these, the EIU noted, pointed to a high rating for Botswana, which has had a history of political stability.

“Nonetheless, the EIU has been slightly surprised by how high the rating was, given the country’s reliance on diamonds, the regional political risk and the impact of HIV/AIDS,” the update said. According to the EIU, the Botswana government wanted the rating to raise investor awareness of the country and to differentiate the country from its politically volatile and “poverty-stricken” neighbours.

In February the finance minister, Baledzi Gaolathe, presented the 2001/02 budget to parliament and according to the EIU, education accounted for the largest portion of government expenditure, with large increases planned for health and infrastructure development.

Quoting the ministry of finance and development planning, the EIU said the government had forecast a 5 percent increase in revenue. Most of this would continue to come from taxes on diamond mining. The EIU added that a fall in revenue from the South African Customs Union (SACU) pool would be offset by a projected rise in the profits made by the Bank of Botswana by investing the country’s foreign-exchange reserves.

In reference to the political situation, the EIU said there was “little sign” that the opposition would be able to mount a serious challenge to the government. It added that the July congress of the main opposition Botswana National Front (BNF), at which the party’s long-standing leader, Kenneth Koma, is due to stand down, may be a stormy affair. “The lack of a clearly defined successor serves to demonstrate the factious nature of the main opposition party, and raises the spectre of a directionless party after the controversial - but politically strong - Mr Koma departs,” said the EIU.