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Data released by the Botswana Stock Exchange (BSE) shows that bond trading volumes in Botswana have increased significantly, more than doubling since the beginning of the year. The local exchange said the increase in bond trading volumes was mainly due to a sharp increase of 175.1% in government bond trading, which now accounts for 82.3% of the total bond market capitalization.
As of the end of July, the number of listed debt instruments in Botswana has reached 134. These include 7 government bonds, 96 corporate bonds, 31 commercial papers and 1 sustainable bond. The surge in trading activity follows a key policy decision by the Ministry of Finance in March 2024 that led to an increase in the ceiling of the government bond issuance program from 30 billion pesos to 55 billion pesos.
The government bond issuance program was established in March 2003 under the Stocks, Bonds, and Treasury Bills Act and has evolved to adapt to the changing dynamics of financial markets. A comprehensive review of the program in 2019 revealed liquidity challenges and pricing constraints, leading to major reforms in September 2020. These reforms included increasing the bond issuance limit to P30 billion, improving market transparency, and launching innovative debt instruments such as inflation-linked bonds (ILBs).
Data from the Bombay Stock Exchange shows that the recent surge in bond trading activity is not limited to government bonds, but also includes growing interest in corporate bonds, reflecting investors’ growing appetite for a variety of debt instruments. Corporate bond trading has also grown significantly, with trading volumes more than tripling compared to the same period in 2023.
However, the growth in bond trading, while encouraging, has also raised concerns about its potential impact on private sector investment. The dominance of government bonds in the market could crowd out private sector funding, posing challenges to economic growth and development.
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