23 Aug 2017

The Bank of Botswana’s monetary policy committee has decided to maintain the bank rate at 5.5 per cent.

Briefing members of the press about the decision on Tuesday, Bank of Botswana governor, Mr Moses Pelaelo said it was meant to safeguard financial stability.

As inflation is forecasted to be below and close to the three to six per cent objective range in the medium term, Mr Pelaelo said the outlook for price stability remained positive.

“Meanwhile, inflation decreased modestly from 3.5 per cent in June to 3.4 per cent in July 2017. Moderate domestic demand pressures and the modest increase in foreign prices contribute to the positive inflation outlook in the medium term,” he said.

However this outlook, Mr Pelaelo said, was subject to downside risks emanating from lower than projected growth in the global economic activity and resultant low commodity prices.

He said any substantial unanticipated increase in administered prices and government levies or taxes and any increase in international commodity prices beyond the current forecasts, presented upside risks to the inflation outlook.

In terms of the country’s GDP growth, Mr Pelaelo said it grew by 3.9 per cent in the 12 months to March 2017 compared to a contraction of 1.8 per cent in the corresponding period ending March 2016.

The improvement in growth, he said, reflected a 5.9 per cent increase in non-mining activity “while mining sector output contracted by 10.3 per cent in the 12 months to March 2017.”

Mr Pelaelo said in the short to medium term, it was projected that domestic non-mining output would be below trend, and that it would be constrained by continued modest growth of household incomes and subdued economic expansion in major trading partners.

However, in the medium-term, Mr Pelaelo said gradual economic recovery was expected in response to anticipated improvement in external economic conditions.

Annual increase in commercial bank credit was 4.1 per cent in June 2017 compared to 7.5 per cent in June 2016.  Lending to businesses, excluding parastatals, grew at a higher annual rate of 9.5 per cent in June 2017 compared to 7.5 per cent in the two corresponding period last year while household borrowing increased by 5 per cent compared to 12 per cent in the same period last year.

The global output, he said was forecasted to grow by 3.5 per cent in 2017 compared to an estimated 3.2 per cent in 2016 and by 3.6 per cent in 2018. ENDS