22 November, 2005
Moody’s Investors Service Releases Botswana’s 2005 Credit Rating Report

Moody’s Investors Service has today released its 2005 credit rating report on Botswana. The sovereign credit ratings that Moody’s assigned to Botswana since 2001 - A2 for long term foreign currency debt, Prime-1 (P-1) for short term foreign currency debt, and A1 for domestic currency debt - remain unchanged for 2005, as does the “stable” outlook.  The report emphasizes that the ratings are underpinned by a strong culture of fiscal prudence, low government and external debt and the successful track record of development based on the commitment of the authorities to address social and economic challenges, including the HIV/AIDS pandemic. Average incomes and development indicators have continued to improve at rates that compare favourably with most countries, while at the same time, the financial position of the country is significantly stronger than many others on similar or even higher ratings levels.

Despite these fundamental strengths, the credit ratings remain constrained by several factors, in particular, the narrow economic base that has remained heavily dependent on diamond mining as a source of additional growth and government revenue. The Moody’s report notes the recent slowdown in overall GDP growth rates and describes the progress on economic diversification away from mining as disappointing.  The report further emphasises the challenge of effectively meeting demands for additional public services in the face of more severe revenue constraints.

Moody’s have welcomed the new crawling band exchange rate mechanism introduced in May 2005 and its intended role of maintaining competitiveness and avoiding the disruptions caused by one-off currency devaluations. They note that the Mid-Term Review of the National Development Plan 9 (NDP 9) provides an opportunity for the Government to give clear guidance on the priorities for economic development, and expresses cautious optimism that the work of the new Botswana Economic Advisory Council will bear fruit.

This is the fourth update to the markets since the initial credit rating was obtained in 2001. The full text of the report will be available on the Bank of Botswana’s website www.bankofbotswana.bw

For further information, contact
Mr. Chepete Chepete
Public Relations Officer
Telephone: (267) 360 6580