Botswana Updates Medium Term Debt Management Strategy

Botswana is one of the few countries in the MEFMI region that has maintained public debt at low and sustainable levels. Prior to the global financial crisis in 2008, the country’s public debt to GDP ratio was 6.5%. However, the Government of Botswana borrowed US$1.5 billion from the African Development Bank in 2009 to finance the budget and cushion its foreign reserves from the impact of the crisis. This drastically increased the country’s public debt to 21.1% of GDP as at end-2009, rising to 25.1% of GDP in 2013. On the domestic front, the Government has made tremendous progress in developing the domestic debt market, including issuing a benchmark bond of 25 years.

To address the challenges associated with increased public debt, the Government developed and published a Medium Term Debt Management Strategy (MTDS) in 2016. However, the strategy was qualitative as it was not informed by a detailed analysis of the debt service costs and risks which helps in setting precise strategic targets on debt management in the medium term. Recognising the deficiencies in the MTDS, the Ministry of Finance in Botswana requested MEFMI for technical assistance to train staff in the debt management unit and update the Medium Term Debt Management Strategy. It is against this background that an in-country workshop was held from 28 August to 6 September 2017 at Masa Square Hotel in Gaborone, Botswana.

The objectives of the workshop were to:

Build capacity of the Ministry of Finance and Economic Development on the use of the IMF/World MTDS analytical tool to develop a debt management strategy; and
Review and update the MTDS of 2016.
The workshop participants were drawn from the debt management working group in the Ministry of Finance and Economic Development. It was attended by 9 officials, of which seven (7) or 78 percent were female and two (2) or 22 percent were male from the following departments: Accountant-General’s Office; Debt Management Unit; Development Budget; and Financial and Economic Policy. The diversity in the background of participants enriched discussions on the proposed medium debt management strategy.
The workshop was facilitated by four (4) resource persons, namely, Messrs Michael Tukacungurwa, a Graduate MEFMI fellow of the Bank of Uganda; Lekinyi Mollel, Accredited Fellow of the Bank of Tanzania; and, Ms Josephine Tito and Mr. Stanislas Nkhata of the MEFMI Secretariat staff.

The workshop was mainly hands-on, with participants actively involved in the step-by-step processes of developing a debt management strategy using the IMF/World Bank analytical tool as well as Microsoft spreadsheet applications. This entailed developing a medium-term debt management strategy underpinned by the country’s macroeconomic environment that is outlined in the country’s Medium Term Fiscal Framework. The following topics were covered:

Overview of the IMF/World Bank MTDS analytical tool;
Macroeconomic environment: discussion on recent economic performance and projections;
Market inputs: interest and exchange rates;
Designing and assessing performance of alternative debt management strategies;
Excel functions for aggregating debt data;
Development of strategic benchmarks for debt management; and,
Debt management strategy implementation.
The workshop also included intensive discussions by participants on the financing options available to the government as an input in the debt strategy formulation process. Participants also made presentations on Botswana’s existing public debt portfolio and macroeconomic projections as inputs into the MTDS formulation process.