17 Jun 2014

The Monetary Policy Committee (MPC) has resolved to maintain the bank rate at 7.5 per cent.

A press release from the Bank of Botswana (BoB) stated that the current state of the economy suggested that the current monetary policy was consistent with maintaining inflation within the bank’s three to six per cent objective in the medium term.

The committee also concluded that the medium-term outlook was positive, with inflation forecast to remain within the three to six per cent objective range in the short to medium term.

The release said world output was estimated to increase by three per cent in 2013 and was further projected to expand by 3.6 per cent in 2014, underpinned by higher growth momentum in advanced economies and relatively strong performance in emerging markets.

Moderate global GDP expansion, subdued demand and capacity underutilisation, including high unemployment rates in major economies continued to restrain worldwide inflation.

In Botswana, it was estimated that GDP expanded by 5.9 per cent in 2013, reflecting growth of 10.6 per cent and 5.2 per cent in mining and non-mining output respectively.

The release further said it was expected that non-mining economic activity would remain below the potential level in the medium term. The influence of demand on economic activity is projected to be modest, largely reflecting trends in government expenditure and personal incomes.

“In April and May 2014, inflation was stable at 4.5 per cent, within the bank’s medium-term objective range of 3 to 6 per cent. Weak domestic demand and projected benign external price developments contribute to the positive inflation outlook in the medium term,” says the release.

However, the bank says the outlook could be adversely affected by any unanticipated large increase in administered prices and government levies as well as higher than currently forecast international oil prices. ENDS