Supply bottlenecks hike inflation
Effects of high inflation could be cushioned by government policies through addressing supply bottlenecks which currently contribute to high prices on commodities.
Inflation decreased from 14.6 percent in August 2022 to 13.8 percent in September. According to Kitso Mokhurutshe, an Economist at E-Consult, addressing supply side bottlenecks is one of the best solutions to address inflation. “By having enough supply of goods, inflation will be lower as there would be enough supply.” He explained government should not take drastic decisions of restricting imports of goods without considering the local production capacity as this affects Batswana badly with prices going up. “Currently, neighbouring countries have been complaining about vegetable import ban and there is a risk of retaliation.”
Government has recently instituted import bans on certain goods including vegetables and school uniform with an objective to develop local production capacity. Recently, the Bank of Botswana Monetary Policy Committee (MPC) stated that inflation will remain above the objective range into the medium term but might go down from the fourth quarter of 2022 and fall within the objective range from the third quarter of 2024. “The projected decrease in inflation in the medium term is due to the dissipating impact of the earlier increases in administered prices, subdued domestic demand, current monetary policy posture, expected decrease in trading partner- countries’ inflation and international commodity prices.” The MPC indicated that growth-enhancing economic transformation reforms and supportive macroeconomic policies are currently being implemented which include affordable credit, improvements in water and electricity supply, reforms to further improve the business. “Against this background, enhanced productivity, innovation, increased production and the resultant competitiveness of domestic firms against imports and in international markets could contribute to lower domestic inflation.”