Botswana launches Financial Stability Council

Amidst African countries, Botswana is a rare jewel.

Botswana represents one of the few development success stories in Sub-Saharan Africa. Real Gross Domestic Product (GDP) growth averaged almost 9 percent between 1960 and 2005, far above the Sub-Saharan Africa average. Real GDP per capita grew even faster, averaging more than 10 percent a year — the most rapid economic growth of any country in the world. The crucial question is: Why has Botswana grown the way it has done, and what lessons does it offer?

This evidence-based story is an account of policy and institutional dynamics of sustained growth and development in Botswana — illuminating the role of leadership. It shows how a secure political elite has pursued growth-promoting policies and developed, modified, and maintained viable inherited traditional and modern institutions of political, economic, and legal restraint. These institutions have remained robust in the face of initial large aid inflows and spectacular mineral rents, producing a growth pattern that has been both rapid and cautious.

The nature of the Botswana developmental state is illustrated by the way in which the state mobilized development resources-especially savings, investment, and human resources, widely known as the primary drivers of economic growth, and prudently managed the economy without becoming excessively involved in the nuts. It demonstrates that through intentional policy choices and countercyclical instruments, countries can shift from aid-dependent to trade-led natural resource development (though probably with narrow-based growth), to a broader development strategy as long as the state is capable and operates within effective institutional design. Botswana’s story is sterling example of how the critical issue in development is not so much access to resources but how resources are managed.

Not interested in sitting on laurels, the country keeps doing something or the other.

Now it has launched a financial stability council. Mr Moses D Pelaelo, Governor of the Bank of Botswana explains:

Ladies and gentlemen, as I look back, the launch is the culmination of several significant steps and consultations. Among these are: first, the initial assessment by the Bank of the need and prospective role of a Financial Stability Council, articulated in the 2018 Monetary Policy Statement; second, consultations by officials within the auspices of the Bank of Botswana/Ministry of Finance and Economic Development Working Group, and also involving the Non-Bank Financial Institutions Regulatory Authority and the Financial Intelligence Agency; third, approval for establishment of the Council by the Honourable Minister of Finance and Economic Development obtained in April 2018; and fourth an inaugural meeting to consider an outline of the Macroprudential Policy Framework and review of the draft Memorandum of Understanding in September 2018.

The Financial Stability Council comprises the leadership of the Ministry of Finance and Economic Development (MFED), the Bank of Botswana (the Bank), Non-Bank Financial Institutions Regulatory Authority (NBFIRA), and Financial Intelligence Agency (FIA), institutions that are involved in developing legislation and regulations, policymaking and supervision with respect to the whole or facets of the financial sector. It is acknowledged that the respective institutions have unique statutory mandates, objectives, oversight frameworks and operational spheres, albeit mostly related.

In this regard, the Financial Stability Council is not established to usurp or dilute the role of the respective institutions, which is neither feasible nor desirable. Rather it is to share information and where, desirable, facilitate collective and coordinated approach to financial sector monitoring frameworks and crisis resolution.

Much like India’s Financial Stability Development Council. Also interesting to note that they have a seperate regulatory body for NBFI..

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