- Fell by over P17bn since 2016
- Draw-downs done secretively
- Fell by P8.5 billion in 2018
Botswana’s sovereign wealth fund, the Pula Fund, has lost over P17 billion between 2016 and to date, a careful scrutiny of Bank of Botswana (BoB) Statement of Financial Position has revealed.
Available numbers reveal that in May 2016, the Pula Fund had P64.4 billion in its accounts. However, the money declined to P54.1 billion as at the 31st of December 2016. BoB’s financial statement also shows that by December 2017, the Pula Fund account had P55.9 billion. Further evidence reveals that by December 31st 2018 the Pula Fund balance had declined to P47.4 billion, which means that the Fund lost P8.5 billion between December 2017 and December 2018.
Government never announces any draw-downs done on Botswana’s foreign reserves especially the Pula Fund. In previous engagements with Bank of Botswana Governor Moses Pelaelo, he said declines in the Pula Fund are as a result of two scenerios; the fluctuating foreign exchange losses as well as draw down by Government to fund budget deficits. For the Fund to lose money, the Pula would have lost value against its major trading partners, especially the US Dollar where the money is invested. For the better part of last year, US$1 averaged plus or minus P10.60 as per analysis by brokerage firm Motswedi Securities. It means there were no major fluctuations to warrant huge losses in the Pula Fund.
During the 2018/19 fiscal period budget deficit was at P3.59 billion or 1.8 percent of GDP. Had government withdrawn funds to patch up the budget deficit, it would have not been P8.5 billion.
In August 2017, Minister of Investment Trade and Industry Bogolo Kenewendo took Minister of Finance and Economic Development Kenneth Matambo head-on in parliament, accusing government of failing to account for the foreign reserves. The Minister challenged Matambo to provide the paper trail of transactions made on foreign reserves, to which Matambo failed. Neither did Matambo point to a public platform where records of foreign reserves are available to the public.
In addition Kenewendo asked Matambo if there are plans to turn the GIA account into a sovereign wealth fund to mirror investments of the Norwegians and the United Arab Emirates, explaining that Sovereign Wealth Funds are long term investments which are kept for the future generations.
She worried that theoretically, the Pula Fund was created to save excess funds from diamond proceeds which could be used by future generation, at a time when Botswana diamonds would become exhausted, government continues to draw down from the fund secretly, without transparency, which could deplete the fund.
Matambo said Government has no plans to change the current legal, governance and institutional framework for the management of the GIA. He said the Government Investment Account may be drawn-down or added to, in line with fluctuations in the Government’s expenditure and revenue out turns.
“This is intended to provide the Government with appropriate flexibility to execute its functions and responsibilities effectively and efficiently. This process is guided by adherence to Government’s fiscal rules,” said Matambo.