BOTSWANA: Domestic Bond Market Development

This paper discusses high-level summery technical assistance report that focuses on Botswana’s domestic bond market development. The implementation of a new monetary policy framework to support the Bank of Botswana’s (BoB) inflation targeting regime is a welcome development for domestic debt market development. There is significant scope to make progress on the authorities’ goal to shift funding from nonconcessional external borrowing to the domestic bond market. Coordination between debt management and liquidity management should be enhanced to facilitate the expansion of the domestic debt market. Material improvements in the secondary market will take more time to bear fruit, and efforts in this area should be sequenced after building blocks that are more foundational are operating more efficiently. Measures to develop the domestic debt market are likely to result temporarily in higher funding costs, but this is a necessary investment in the process and will likely be counterbalanced by lower financing costs in the medium-to-long term.