It was a first for the African Development Bank (AfDB) and a first for Botswana, which had not borrowed on international markets for 17 years. The $1.5bn budget support facility from the AfDB, the biggest it has ever advanced, is to help Botswana fund a rare budget deficit, estimated at 13.5% of GDP. After a collapse in demand for diamonds prompted a four-month closure of the mines (the larger ones re-opened in April), the government’s desire to offset the downturn with counter-cyclical spending created a big headache for the treasury.
To meet the budget shortfall and to avoid running down the country’s foreign exchange reserves, a round of borrowing was announced. Trade minister Neo Moroka said: “We have good credit ratings – now it is time to reap the benefits.” For AfDB President Donald Kaberuka, the case for lending was obvious: “Yes, it is a large sum, but if we are not going to help Botswana, one of the best-managed economies on the continent, then who are we going to help?” However, the downgrading of Botswana’s credit rating by Moody’s in March was a sign of the strain to come.
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