Pula Fund

What Is the Pula Fund?

The Pula Fund is a sovereign wealth fund (SWF) laid out by the government of Botswana. It is co-claimed by Botswana's government and the central bank, the Bank of Botswana. Sent off in 1994, it is one of Africa's biggest and most established sovereign wealth funds. the Pula Fund is long-term investment portfolio, that oversees revenue derived from Botswana's diamond exports. Extra contributions are made by the federal government and the country's central bank.

Understanding the Pula Fund

The Pula Fund is one of Africa's most seasoned sovereign wealth funds. Made in 1994, it was named after the national currency, the Botswana pula (BWP). It plans to save and invest earnings created by the country's diamond industry. Recent data positions the Pula Fund as the 56th biggest in the world and the second-biggest in Africa after the Libyan Investment Authority. The fund had a total of $4.1 billion in assets as of June 2022.

As verified over, the fund is run by both the country's federal government and the Bank of Botswana. The last option is responsible for figuring out the fund's investment policies. The national government contributes excess fiscal revenue to the fund. This is notwithstanding contributions of foreign exchange reserves made by the central bank.

The Pula Fund is designed according to SWFs laid out by different nations over the course of the last part of the twentieth century, one of the first was laid out by Kuwait in 1953. Countries with important natural resources frequently lay out SWFs to give a cushion to future periods when either resource prices or supplies decline essentially or out of nowhere.

Top-performing SWFs, for example, those of Norway or the United Arab Emirates, have prevailed by chasing after a policy of setting money to the side for overseas investment under thorough oversight and limitations on government access to those funds. Botswana's Pula Fund utilizes a comparable asset aggregation and investment strategy yet is impressively weaker with respect to the fund's oversight.

The Norway Government Pension Fund is the biggest sovereign wealth fund in the world, holding more than $1.34 trillion in assets. The China Investment Corporation is the second-biggest with $1.22 trillion in assets, followed by the Abu Dhabi Investment Authority is third with $708.8 billion in assets.

Special Considerations

Specialists accept Botswana's diamond industry will be drained of resources as soon as 2030. This approaching shortage of diamonds represents a serious threat to Botswana's economy. At its pinnacle, mineral revenue contributed around 60% of the government's annual budget, yet presently accounts for around 33%. Minerals contribute around 12% to GDP, down from a pinnacle of 30%. The government trusts that by saving and investing these earnings while they are as yet accessible, the long-term economic impact can be relaxed.

Analysis of the Pula Fund

The Pula Fund's governance has been a subject of major debate. The Columbia Center on Sustainable Investment issued the Pula Fund low stamps with regards to public accountability. It notes the fund needs clear policy objectives and explicit operational rules for deposits and withdrawals. The center additionally recommends the public is given deficient data on the fund assets and oversight of its activities is weak.

The Bank of Botswana recognizes there have been times when the government has drawn upon the fund's resources, for example, when it moved assets to lay out the Public Officers Pension Fund.

Features

• The fund is co-claimed by the government and the Bank of Botswana.
• The Pula Fund is the sovereign wealth fund of Botswana.
• Pundits propose the fund needs transparency and rules for taking care of deposits and withdrawals.
• The principal source of funding is excess foreign exchange reserves emerging from the country's diamond exports.
• Laid out in 1994, it oversees revenue derived from the country's diamond reserves.