10 Nov 2024

Governor of the Bank of Botswana, Mr Cornelius Dekop says the country is not facing a financial crisis but a cash flow challenge.

Addressing a press conference recently in Francistown, Mr Dekop said there was a mismatch between revenue and expenditure due to a high import bill.

"I want to assure everyone that Botswana is not broke," he said, adding that cash inflow was insufficient to meet all needs in light of the high cost of imports.

The governor explained that government was working to address the situation and was exploring strategies to boost revenue and streamline expenditure, adding that they included diversifying the economy, promoting domestic production and improving efficiency in public spending.

He said they were confident that they would navigate the challenges and ensure the sustainability of the economy.

The governor also said it was crucial for government to implement effective solutions to address the cash flow challenges and ensure long-term economic stability.

On other issues, Mr Dekop said the monetary committee had decided to reduce the monetary policy rate from 2.15 per cent in August to 1.9 per cent. 

He said the move was intended to stimulate economic activity. 

He also emphasised the need to maintain the current rate, saying it was a strategic response to ongoing inflationary trends affecting the economy. He noted that reducing the interest rate made borrowing cheaper and that it lead to increased economic activity. 

He added that the decision was made after considering various economic indicators. 

“We remain committed to ensuring the stability of the financial system and fostering sustainable economic growth," Mr Dekop said.

He explained that their decision reflected a balancing act between stimulating economic activity and tackling rising prices. He said they would continue to monitor economic developments and that future adjustments to the monetary policy rate were possible depending on inflation trends and economic performance. Mr Dekop also warned that without significant changes, the economy was likely to remain below its full capacity due to changing inflation rates. 

He said although inflation was currently low, it continued to erode the purchasing power and stifled consumer spending and investment in key sectors.

He said high inflation had always been a barrier that could not be overlook because it not only affected the cost of living, but also impacted businesses reliant on stable economic conditions for growth.

He said the economy's heavy dependence on diamond exports faces mounting challenges. 

He added that declining global prices for the precious stones and increased production costs exacerbated the situation and limited revenue generation.

He said inflation rates have soared over the past year and have impacted the cost of essential goods and services, adding that it strained households and businesses alike and created a downward spiral that hindered recovery efforts.

Mr Dekop said it was crucial to diversify economic activities and that depending on a single resource made us vulnerable.

The monetary policy committee is responsible for formulating and implementing the monetary policy. It assesses economic conditions and makes decisions regarding interest rates and other monetary policy tools. Ends