01 May 2020

Bank of Botswana Monetary Policy Committee (MPC) has decided to reduce the primary reserve requirement from five per cent to 2.5 per cent, effective May 1.

Answering questions from the media on Thursday, the Director of Research and  financial Stability Department, Dr Tshokologo Kganetsano said the decision is expected to inject liquidity of approximately P1.6 billion into the banking system, which should allow commercial banks to be unconstrained in performing the necessary financial intermediation to support economic activity.

He said the bank will implement a new annual downward rate of 2.87 per cent with effect from May 1 representing a change from the current 1.51 per cent and this is complementary to the reduction of the bank rate and contributes to further easing of real monetary conditions in the economy.

Dr Kganetsano said other measures already implemented by the bank to which form part of the monetary policy and regulatory response to the COVID-19 economic fallout include among others, the cost of assessing overnight funding by licensed banks from the Bank of Botswana Credit facility.

It is provided at the prevailing bank rate without punitive six per cent points above the bank rate prevailed before.

He said the facilities that were available only overnight basis are now offered  against eligible securities with maturity of up to 92 days and the minimum capital adequacy ratio for banks was reduced from 15 per cent to 12.5 per cent which should provide capital relief amounting to approximately P326 million for the entire banking industry.

Dr Kganetsano said all these measures are meant to ease borrowing costs in the economy and provide a sound springboard for future recovery. Ends