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Question: Tuesday, June 2, 2009, was an historic day when the Board approved the Country Strategy Paper and US$1.5 billion to Botswana. Why has Botswana, which had not borrowed from the Bank for the last 17 years, decided to urgently come to the Bank for a big loan?
Response: Botswana is one of a number of countries that have been hit hardest by the current global financial crisis and economic downturn. This is mainly because of the dominance of the country’s mining industry, particularly diamonds, as the main economic driver and source of exports and government revenues. Starting from the last quarter of 2008, reduced demand for and falling prices of diamonds led to lower export receipts and lower government revenues. This situation has also contributed to a significant deterioration in Botswana’s near-term economic outlook. Against set public expenditure plans, this has resulted in a substantial budget deficit estimated at 13.5% of GDP in 2009/2010, with minimum chances to reverse this trend in the short term. The Government of Botswana is determined to sustain its development programmes and has decided that it will meet the financing gap in several ways, including drawing down on its accumulated savings; borrowing externally where the terms and conditions permit; and borrowing from the local financial market. It was within this context that the government of Botswana contacted the Bank and other partners for appropriate facilities to finance the gap. Within the context of the EDSL, the Bank will support reforms designed to enhance competitiveness and private investment. In addition to the Economic Diversification Support Programme (EDSL) loan, the government plans to implement a number of projects, especially in infrastructure to ease bottlenecks, including in the area of energy, with support from the Bank and other partners. In this regard, the Country Strategy Paper approved by the institution’s boards addresses not only the immediate challenges faced by Botswana relating to the global financial and economic crisis, but also lays a firm foundation for a more competitive and diversified economy over the medium and long term.
Question: Your team has been able to respond to the request from Botswana with tremendous speed. How did you do this and what can we learn from the process?
Response: The Bank has been challenged by a Medium Income Country (MIC) that had not borrowed for 17 years. The Bank had to do everything within its power to respond to this positively and adequately without compromising on quality and taking all necessary precautions. This meant that we establish a Botswana Response Task Team comprising all relevant Departments and Units to concurrently and speedily prepare the 2009-2013 Country Strategy Paper and the Botswana Economic Diversification Support Programme, for an ADB loan of US$1.5 billion. The delivery of both documents and their submission to the Board in record time was possible as a result of well coordinated inter-departmental collaboration by the mission teams drawn from a number of departments. All the team members demonstrated an extraordinary sense of commitment to the task at hand and produced the final products in a timely manner and to the satisfaction of Botswana authorities and the AfDB board of directors. The cardinal lesson that can be learnt from this is that with team work, the Bank can pool its talents together and achieve extraordinary results.
Question: Due to the impact of the current financial crisis and economic downturn, other middle income countries may as well approach the Bank with requests for support similar to that of Botswana. Is the Bank prepared to respond as swiftly and as positively as it did for Botswana?
Response: The Botswana operation has already provided the Bank proper knowledge and tools to deal with similar requests. It has also raised the institution’s franchise value. The Bank’s regional member countries (RMCs) will view the Bank as a strong partner on which they can call to meet the challenges their economies are facing today. It is possible that other RMCs, facing difficult conditions as a result of the financial crisis, may approach the Bank for similar support. The Bank will respond appropriately, taking into consideration the peculiarity of each case and the Bank's capacity. Definitely, the experience we have gained in responding to the needs of Botswana will be valuable going forward.