Finance and Development: the Case of Botswana

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Abstract
It is still frequently asserted that the economic sluggishness plaguing most Third-World countries stems from a general lack of resources. The scarcity of capital in both the public and private sectors, it is claimed, prevents the investment needed to achieve development. On the other hand, a fewdeveloping countries with highly profitable exports – notably those that export oil – reap large financial surpluses, including foreign exchange, but do not invest them locally in productive activities. The problem here is supposed to be insufficient ‘absorptive capacity’ due to the absence of skilled personnel and inadequate physical and social infrastructure, restricting the translation of financial resources into real investment. The situation in Botswana provides a test for both these hypotheses, making possible a deeper understanding of the potential rôle of financial resources in the development process.

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