Botswana's Financial Stability Council published an update from its 8 May 2025 meeting, concluding that the financial system remains safe and sound but that financial stability risks are rising amid a more uncertain macroeconomic environment. Key domestic vulnerabilities highlighted include a deteriorating fiscal position, slow growth and structurally lower liquidity in the financial system. The Council pointed to growing interconnectedness and funding concentration across the financial system, warning that concentration can constrain market activity and liquidity distribution, raise funding costs and potentially weaken monetary policy transmission. It urged continued vigilance by regulators and financial institutions on credit exposures and liquidity developments, while noting that weaker diamond market performance has weighed on fiscal and external stability and contributed to historically low commercial bank liquidity through net foreign exchange outflows and slower government spending. It also referenced Bank of Botswana actions to support liquidity, including reducing the primary reserve requirement to zero in December 2024 (releasing around P1.8 billion) and extending repo maturities with commercial banks from overnight to seven days, while signalling further policy and regulatory responses to structural liquidity shortages, funding concentration and banks’ foreign currency holdings. Other workstreams noted include harmonising corporate governance principles, strengthening resolution and crisis management frameworks, monitoring cyber and climate risks (including the Bank of Botswana joining the Network for Greening the Financial System as a Plenary Member on 4 March 2025), forthcoming consumer protection and inclusion-related regulatory developments, and continued efforts to address AML/CFT/CPF gaps ahead of the 2027 ESAAMLG mutual evaluation, including a new National Coordination Office established under the Financial Intelligence (Amendment) Act, 2025 and an AML/CFT Strategy for 2025–2030. A fuller assessment is expected in the May 2025 Financial Stability Report, scheduled for publication in June 2025, and the next Council meeting is set for 6 November 2025.
Botswana Non-Bank Financial Institutions Regulatory Authority 2025-05-23
Botswana's Financial Stability Council judges the system sound but flags liquidity shortages and funding concentration risks
Botswana's Financial Stability Council reported rising financial stability risks due to a deteriorating fiscal position, slow growth, and lower liquidity, despite the system being deemed safe. The Council highlighted concerns over funding concentration and interconnectedness, urging vigilance on credit exposures and liquidity. The Bank of Botswana has reduced the primary reserve requirement and extended repo maturities to support liquidity, with further policy responses anticipated.