About the Botswana Pula
The pula is the official currency of Botswana, and it is used in an unofficial capacity in Zimbabwe. This decimalized currency is divisible into hundredths in units called thebe. The name of the currency comes from the Setswana language and translates into "rain." Because the climate of Botswana is so arid, rain is considered very valuable. The name of the subunit currency, thebe, is from the Setswana word for "shield."
Botswana was officially declared an independent nation in 1966. For the first 10 years, the country used the South African rand for its currency under an agreement called the Rand Monetary Area, which included several African countries. In 1974, a Botswanae commission decided to withdraw from the RMA, despite the advice of leading international financial experts, including those with the International Monetary Fund (IMF). Although it was a risky move, it did have the advantage of allowing Botswana financial independence to pursue its own economic strategies. To this end, the Bank of Botswana was established in 1975 and the new Botswana pula was introduced in 1976. The day of issuance, August 23, remains a Botswana holiday called Pula Day.
The pula was introduced at an on-par rate with the South African rand. This allowed the banks to maintain their assets in rand as foreign reserves. At the time, the rand was pegged to the US dollar at a rate of 1 rand: 1.15 USD. The following year, the pula was revalued against the rand by 5 per cent. In 1979, a managed float system was enacted, but the peg on the US dollar was not removed until 1980. After this, an exchange rate regime relying on a weighted basket of currencies was maintained. This remained in place until 2005, when a crawling band mechanism was adopted in which the rate of crawl is linked to the difference between Botswana's inflation objective and the predicted inflation of trading partners.
In the 1980s, the country's reserves grew substantially, and the Bank of Botswana was required to develop strategies for the management and investment of their new assets. The return from these strategies has been a major source of revenue for the country since this time. The Bank of Botswana, and the economy of the country as a whole, is one of the most stable on the African continent. The Bank went through a new reorganization in 2010 aimed at keeping the currency relevant on the international exchange.