05 May 2026

Domestic inflation is forecast to rise sharply in the near term and breach the upper bound of the 3 – 6 per cent objective range. The projected sharp increase is mainly on account of the combined impact of recent increases in domestic fuel prices, public transport fares and medical aid premiums.

Presenting the Monetary Policy Committee report, Bank of Botswana Governor, Mr Lesego Moseki said inflation was projected to average 8.7 per cent in 2026 before easing to 5.6 per cent in 2027. 

“Inflation is nonetheless expected to ease and gradually revert to within the objective range in the medium term, if the impact of the Middle East war on international oil prices subsides,” he said.  Moreover, he said the economy was expected to continue to operate below full capacity in the short-to medium term, which was likely to keep demand-driven inflationary pressures subdued. Mr Moseki however stated that the monetary policy committee considered the need to recalibrate and reinforce policy transmission and signaling. 

He further stated that headline inflation increased slightly from 4 per cent in February 2026 to 4.2 per cent in March 2026, remaining within the medium-term objective range of 3 – 6 per cent.  “The increase in inflation was due to higher rate of price increases for transport and food as well as non-alcoholic beverages,” he said.

Overall, Mr Moseki stated that there was a greater risk of inflation being higher than currently projected due to potential second-round effects stemming from the recent increase in domestic fuel prices and possible increase in administered prices like electricity tariffs and public transport fares.

He added that the outbreak of Foot and Mouth Disease (FMD) in January 2026 and the resultant disease management measures in terms of livestock movement and slaughter restrictions may lead to higher food inflation.

 Externally, Mr Moseki noted that the increases in prices for oil, gas, fertilisers and industrial inputs due to the war in the Middle East would continue to be inflationary if the war persists. 

“The effect of tariff increases globally is also expected to heighten inflation risks. Inflation could, however, be lower than projected if domestic and global economic activity remains subdued, fiscal space remains tight, or if international commodity prices fall,” he said.

 Accordingly, Mr Moseki t the committee decided to increase the monetary policy rate by 200 basis points, from 3.5 per cent to 5.5 per cent.

 “Like the October 2025 adjustment, this is not monetary policy tightening but a recalibration to amplify the impact of the policy adjustments that have helped ease liquidity conditions.  This adjustment also helps to strengthen the effectiveness of the exchange rate parameter adjustments,” he said.ENDS