10 Dec 2023

The Monetary Policy Committee (MPC) has decided to reduce the monetary policy rate by 25 basis points from 2.65 to 2.4 percent.

Addressing the media in Gaborone recently, governor of  Bank of Botswana (BoB), Mr Cornelius Dekop said headline inflation decreased slightly from 3.2 per cent in September to 3.1 per cent in October 2023, and that it was within the bank’s medium-term objective range of 3 to 6 per cent.

Mr Dekop said the slight decrease in inflation was mainly due to a broad-based deceleration in food prices, and that inflation was forecasted at 3.9 per cent for November 2023.

“The slightly higher forecast inflation for November is mainly due to base effects associated with the decrease in domestic fuel prices effected in 2022. The MPC projects that, going forward, inflation will remain within the objective range into the medium term,” he said.

Mr Dekop said the committee observed that inflation could be higher than projected international commodity price increases beyond the current forecasts. He noted that supply and logistical constraints persisted and that the reversal of global economic integration had escalated.

Furthermore, he said possible upward adjustment in prices controlled by government such as electricity and water was not factored into the current projections, and that any increase in domestic food prices due to the expected El Nino conditions may lead to higher inflation.

However, Mr Dekop said inflation could be lower than currently projected because of weaker domestic and global economic activity, disinflationary effects of higher monetary policy rates globally and any decrease in international commodity prices.

In addition, Mr Dekop said Gross Domestic Product (GDP) grew by 5 per cent in the 12 months to June 2023 compared to 6.7 per cent in the year to June 2022, saying the slowdown was mainly due to lower growth in mining production.

“According to the October 2023 World Economic Outlook, global output growth was 3.5 per cent in 2022 and is forecast to moderate to 3 per cent and 2.9 per cent in 2023 and 2024 respectively,” he said.

He said for Botswana, the Ministry of Finance projected GDP growth to moderate to 3.8 per cent in 2023 and to recover to 4.4 per cent in 2024, down from an increase of 5.8 per cent in 2022.

Furthermore, he said the monetary committee noted the growth-enhancing economic transformation reforms and supportive macro-economic policies being implemented in the country. 

He said they included supportive monetary and fiscal policies, improvement in water and electricity supply, implementation of the economic recovery and transformation plan, two-year Transitional National Development Plan as well as reforms to further improve the business environment.

Moreover, Mr Dekop said the committee projected the economy to operate below full capacity in the short-term and thus not generating any demand-driven inflationary pressures.

He noted that inflation was forecasted to remain within the objective range in the medium term, averaging 4.9 per cent in 2024 and 4.7 per cent in 2025.

Mr Dekop said businesses also expected inflation to be within the medium-term objective range and that inflation expectations were well anchored.

He said the current state of the economy and the outlook for both domestic and external economic activity provided a scope to ease monetary policy, and that the committee decided to decrease the monetary policy rate by 25 basis points to 2.4 per cent. Ends