Botswana’s bank rate stays put at 3.75%

February 25, 2022

The Bank of Botswana’s (BoB) Monetary Policy Committee (MPC) maintained the bank rate at 3.75% at a meeting held on Thursday, 24 February 2022.

The BoB MPC highlighted that demand-driven inflationary pressures are likely to remain limited due to their expectation of the economy operating below full capacity in the short to medium term.

“ However, the increasing likelihood that inflation will continue to breach the BoB objective range for most of the year, coupled with increasing global policy normalisation, heightens pressure on Botswana’s policy rate to be adjusted upwards to narrow the negative real interest rate to avert capital outflows, despite a relatively mute demand side.”

According to the 2022 Monetary Policy Statement, the BoB will adopt the 7-day Bank of Botswana Certificate (BoBC) yield as its anchor policy rate, doing away with the bank rate as a policy signalling tool.

The new policy rate, termed the Monetary Policy Rate will be effective as of April 2022, along with several other reforms aimed at enhancing local monetary policy transmission.

“On general prices, due to the timing of last year’s supply-side changes, where taxes, levies and tariffs were increased at the start of 2Q21, inflation is only expected to start moderating in 2Q22 and revert to the central bank’s 3%-6% objective range in 3Q22. Upside pressure on inflation is expected to stem from the transport index, with local fuel prices being adjusted to account for higher international oil price. Additionally, utilities and rental prices are expected to be upwardly revised due to reduced subventions from the government to major parastatals — to date, the National Electricity Fund levy rate has been increased by P0.05 per KWh,” RMB said.

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