The Bank of Botswana (BoB) has dismissed the current liquidity squeeze in the financial sector as a man-made problem that requires targeted intervention to restore normalcy. Speaking at a Monetary Policy training for business reporters in Francistown this week, senior management from the Central Bank reiterated that the healthy annual returns declared by various banking institutions indicate that the financial sector remains robust and profitable. Hosted by the newly appointed Governor Lesego Moseki, the workshop was meant to drill journalists on the duties and objectives of the Monetary Policy Committee.
According to Principal Economist in the Research and Financial Stability Department, Bokhana Motshewa, this demonstrates that Batswana continue to take up and service loans. Motshewa said the liquidity squeeze is partly due to government no longer injecting as much money into the economy as it previously did. “Remember, the biggest driver of the economy has always been the government.
But with the current economic situation, government’s liquidity is not the same,” she said. She further highlighted that non-performing loans currently stand at 3.5%, a level considered healthy. “If non-performing loans were to balloon to around 15%, then we would have a serious problem,” she warned.
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In his presentation, Senior Economist in the Research and Financial Stability Department, Dr. Lesego Molefhe, said the biggest challenge the country faces is the redistribution of funds. He explained that the liquidity difficulties stem from hoarding by some financial institutions, which disrupts overall cash flow.
“The liquidity is there; the problem is redistribution. Funds may be concentrated in one or two banks, which has forced other banks to repeatedly access the Standing Credit Facility to manage their liquidity,” he said. Molefhe added that after observing increased borrowing by commercial banks from the Central Bank, BoB introduced interventions by implementing targeted liquidity support measures to address tight domestic liquidity conditions.
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