BoB retains accommodative policy

Despite economic uncertainties prevailing across the country, the reserve bank has maintained an accommodative monetary policy, to support economic recovery.

The Bank of Botswana’s (BoB) Monetary Policy Committee (MPC) has decided to maintain the bank rate at 3.75 percent to prop up economic activities in the country.

“The MPC decided to continue with the accommodative monetary policy stance and maintain the bank rate at 3.75 percent. The bank stands ready to respond appropriately as conditions dictate,” said BoB Governor, Moses Pelaelo.

Pelaelo highlighted that the decision has been influenced by projections that the economy will operate below full capacity in the short to medium term and the anticipated increase in inflation in the short term, due to transitory supply-side factors.

Statistics Botswana’s latest report has indicated that inflation rose from 8.2 percent in June to 8.9 percent in July.

Analyst have indicated that inflation will remaining above the upper bound of the reserve bank’s medium-term objective range of three to six percent until the second quarter of 2022.

“Inflation is projected to revert to within the objective range in the second quarter of 2022, mainly on account of the dissipating impact of the recent upward adjustment in value added tax (VAT) and administered prices from the inflation calculation; which altogether contributed 5.2 percentage points to the current level of inflation,” said Pelaelo.

Meanwhile, projections by the Ministry of Finance and Economic Development and the International Monetary Fund (IMF) suggest a rebound in economic growth for Botswana in 2021.

Authorities at the Ministry of Finance project an economic growth of 8.8 percent in 2021, before moderating to a growth of 5.5 percent in 2022 while IMF forecasts the economy to grow by 8.3 percent, before it moderates to 6.4 percent in 2022.