06 Feb 2017

The domestic economy is projected to grow by 4.2 per cent this year due to expected slight improvement in the mining sector.

Delivering the budget speech yesterday, Minister of Finance and Economic Development, Mr Kenneth Matambo said positive growth in the non-mining sectors would contribute to the 4.2 per cent economic growth.

However, Mr Matambo cautioned that falling commodity prices and slow recovery of the global economy pose risks to the growth prospects.

The domestic economy showed a positive growth of 2.9 per cent last year after a negative growth of -1.7 per cent the previous year.

Mr Matambo, who said macro-economic stability is necessary to achieve growth and job creation, further explained that domestic annual inflation was at three per cent in December.

“In the medium term, the domestic inflation outlook remains positive due to low demand and continued stability in the global oil industry. As a result of the positive inflationary outlook, the Bank of Botswana has again maintained an accommodative monetary policy stance over the past year, reducing the bank rate from six per cent in July 2016 to 5.5 per cent in August 2016,” Mr Matambo said.

He said this policy stance is expected to encourage borrowing for investment purposes.

He said the low inflation environment is, on the other hand, necessary for fostering international competitiveness of domestic industries and support economic development necessary for creating employment.

The minister said foreign exchange reserves were P76.8 billion in December, which was a decline of 9.5 per cent from the previous year.

“A fall in the reserves is primarily as a result of an increase in demand for foreign exchange to pay for imports, notably for imported electricity by Botswana Power Corporation. These levels of reserves are equivalent to 17 months cover of goods and services,” Mr Matambo said. ENDS