He explained that the bank is aware of Botswana’s energy deficit, lower exports receipts and SACU revenues as a result of the global recession. Kaberuka was speaking at the signing ceremony of $1.5 billion (P10.1 billion) Economic Diversification and Budget Support loan for Botswana availed by the AfDB. The loan was approved by the AfDB board in June to help fill the gap in the government’s huge budget deficit of up to 13.5 percent of GDP for 2009-2010 financial year. The deficit was caused by falling commodity prices, particularly diamonds.
Kaberuka is in the country with an AfDB team for a two-day official visit to strengthen cooperation, especially in relation to the global financial crisis. “The bank is pleased to respond and we hope we responded swiftly to one of the best performing member countries,” he said. He added that the loan falls within the framework of the recently approved strategy by the bank to provide support to member countries affected by the financial crisis. It is the largest such facility ever granted by the AfDB and the first borrowing by Botswana in 17 years from the bank.
Speaking at the signing ceremony, acting Finance Minister, Kenneth Matambo said government needs resources to implement key infrastructural development projects, improving private sector growth, creating employment and poverty reduction. “The fact that the performance of the diamond industry is not likely to improve as we would have liked, suggests that diversification and a vibrant private sector are essential to ensure long term sustainability of the economy,” he said.
Matambo added that the AfDB loan comes against the backdrop of ongoing key government reform programmes that include privatisation, private sector participation in the economy, improvement of competitiveness, trade policies and financial sector reform.
The repayment period of the loan is 15 years, with a grace period of five years. The interest rate is six months LIBOR plus a funding cost margin and 40 basis points. Matambo said government has an option to repay any portion of the principal amount outstanding and fix the interest rate “applicable at any time”.
Kaberuka and his team is scheduled to hold discussions with President Ian Khama, Matambo, top government officials and private sector operators to brief them about the bank’s activities. The AfDB team will brief the officials about what they are doing to assist African countries affected by the global economic crisis. Since 1973, AfDB has funded 32 operations in Botswana worth 1.3 billion excluding emergency assistance. The bank has financed projects focusing on social sectors, transport, communication, agriculture, finance, water supply and sanitation.
The bank recently extended assistance to the country through a loan to finance the Pandamatenga agriculture infrastructure project and the Kazungula bridge. The AfDB board approved a new Country Strategy Paper (CSP) for Botswana covering the period 2008-2019 on June 2 this year. The new strategy focuses on expanding private sector investment and removing infrastructure bottlenecks to enhance competitiveness and growth.
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