The New Pula Exchange Policy

Good morning, let’s get into it!

Ministry of Finance press release dated December 31, 2025, regarding the Pula Exchange Rate Policy for 2026.

The primary change is the introduction of asymmetric (unequal) trading margins. This is a strategic move to help local exporters and protect the country's dwindling foreign exchange reserves.

Key Changes to the Pula (Effective Jan 1, 2026)

The biggest update is how the Bank of Botswana (BoB) trades with commercial banks. Previously, these margins were "symmetric" (the same on both sides). Now, they are "asymmetric":

• Buying Rate Reduced (The Change): The rate at which the Bank of Botswana buys foreign currency from commercial banks has been reduced from 7.5% to 3% from central parity.

  • The Impact: This means when exporters (like diamond mines or local manufacturers) bring foreign currency into Botswana and trade it for Pula, they will receive more Pula than they did before.

• Selling Rate Maintained: The rate at which the Bank sells foreign currency to banks remains at -7.5%.

  • The Impact: It remains expensive for banks to buy foreign currency from the central bank. This is designed to force banks to trade with each other (the interbank market) rather than draining the central bank's reserves.

What Stays the Same?

While the trading margins shifted, two other major policy levers remain unchanged from the July 2025 review:

1. Rate of Crawl: Remains at a downward crawl of 2.76% per year. This means the Pula is intentionally being allowed to gradually lose value (depreciate) to keep Botswana's exports cheaper and more competitive globally.

2. Currency Basket: The Pula remains pegged to a 50/50 split between the South African Rand and the SDR (a basket of major global currencies like the USD, Euro, and GBP).

Why is this happening?

The document outlines three main goals for these adjustments:

• Helping Exporters: By giving them more Pula for their foreign earnings, the government is trying to offset the "subdued diamond market" and encourage companies to bring their money back into the country.

• Protecting Reserves: Botswana’s foreign exchange reserves have been under pressure. These rules make it harder for the central bank to lose "forex" and easier for it to accumulate more.

• Market Independence: It forces commercial banks to find foreign currency from sources other than the Bank of Botswana, creating a more mature and self-sustaining local financial market.

Summary Table: Pula Policy 2026

The next review is scheduled for June 2026.

Source;

Ministry of Finance