BOB MAINTAINS INTEREST RATE
Bank of Botswana has maintained benchmark interest rate at 3.75 percent amid rising inflation as a result of increased administered prices. Botswana’s inflation is on an upward trajectory having increased further from 5.6 percent in April to 6.2 percent in May 2021.
At this level, inflation has breached upper bound of the central bank’s medium-term objective range of 3-6 percent for the first time since June 2013.
“The increase in inflation in May mainly reflects second-round effects of the recent upward adjustments in
administered prices. However, inflation is projected to revert to within the objective range in the second quarter of 2022,” said a statement.
The bank, which is led by Moses Pelaelo, further explained that, risks to the inflation outlook are assessed to be skewed to the upside.
Some of the risks include the potential for increase in international commodity prices beyond current forecasts; persistence of supply constraints due to possible maintenance of travel restrictions and lockdowns and domestically based risk factors relating to second-round effects of the recent increases in administered prices.
Meanwhile, the bank’s Monetary
Policy Committee has also stated that, short-term adverse developments in the domestic economy occur against a growth-enhancing environment. “This include accommodative monetary conditions, improvements in water and electricity supply, reforms to further improve the business environment and government interventions against COVID-19, including vaccine rollouts, and the implementation of ERTP and Industry Support Facility,” said the bank.
ERTP stands Economic Recovery and Transformation Plan, which aims to bolster the economy which has been battered by COVID-19 and the drastic fall on the mining sector, which is the main cog of the economy.