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Finance ministry unveils economic relief measures

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Dr. Wilfred Mandlebe

In response to the economic havoc caused by the Covid-19 pandemic, the Ministry of Finance and Economic Development this week unveiled a series of interventions to cushion the local economy and the public.

The interventions are hinged on four pillars; being to support workers; stabilization of businesses; ensuring availability of strategic reserves; and promotion of opportunities for economic diversification.

According to the Permanent Secretary in the Finance Ministry, Dr. Wilfred Mandlebe, as a way to support workers, government will cover 50 percent of basic salary of employees of companies affected.

Mandlebe says subsidy for the employees range between P1000 and P2500 for the next three months, starting April until June, 2020.

To businesses, government is offering a loan guarantee of up P 1billion to companies with 80 percent covered by government while the remaining 20 percent is by commercial banks at a 24 months guarantee cover and a maximum loan size of P25 million per borrower.

However, for companies to qualify for the intervention they have to be tax compliant.

Mandlebe says government has also developed guidelines targeting sectors that have been negatively affected by the Coronavirus pandemic with the exact terms and conditions yet to be discussed.

Furthermore, the ministry put in place measures pertaining to the Monetary Policy.

Among the measures to be put in place is to reduce the Bank Rate in order to jump start the economy by encouraging borrowing.

The central bank, Bank of Botswana has recently announced that it has removed a 6 percent penalty for commercial banks to access credit from it.

The bank has also reduced the prudential capital adequacy ratio for banks operating in Botswana form 15 percent to 12.5 percent.

The central bank says the cost of accessing overnight funding by licensed commercial banks form the Bank of Botswana Credit Facility will also be provided at the prevailing Bank Rate of 4.75 percent without the current punitive 6 percentage points above the Bank Rate.

Subject to completing regulations and requirements to valuation and custody, the collateral pool for borrowing by licensed commercial banks will be extended to include all corporate bonds listed and traded on the Botswana Stock Exchange.

Due to the coronavirus, which has affected all parts of the world, global growth projections for 2020 have been revised downwards.

The local economy was forecast to register a GPD growth of 4.4 percent and now BoB says the figure will be much lower than this projection.

BoB projects economy recovery to start taking place in the latter part of 2020 and into 2021, assuming that the spread of Covid-19 is contained and vaccines are discovered.

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