Botswana’s central bank on Thursday decided to maintain the country’s monetary policy rate (MoPR) at 2.65 percent to support economic recovery.
Moses Pelaelo, governor of the Bank of Botswana, said that the Monetary Policy Committee (MPC) projected that the economy will operate below full capacity in the short to medium term and, therefore, not create any demand-driven inflationary pressures.
“The projected elevated inflation in the short term is primarily due to supply-side factors and related second-round effects and entrenched expectations (including, through price adjustments by businesses, contractors and property owners), while demand remains modest,” said Pelaelo.
Statistics Botswana, the country’s data authority, recently highlighted that inflation decreased from 14.6 percent in August to 13.8 percent in September, remaining above the central bank’s medium-term objective range of 3 percent to 6 percent.
The fall in inflation has been partially attributed to a downward adjustment of domestic fuel prices in September.
The MPC, however, projected that inflation will remain above the objective range into the medium term but trend downwards from the fourth quarter of 2022 and fall within the objective range from the third quarter of 2024.
“The projected decrease in inflation in the medium term is due to the dissipating impact of the earlier increases in administered prices, subdued domestic demand, current monetary policy posture, expected decrease in trading partner countries’ inflation and international commodity prices,” said Pelaelo.
He highlighted that there is a significant risk that inflation could remain elevated owing to factors that include the potential increase in international commodity prices beyond current forecasts, the persistence of supply and logistical constraints to production, and the adverse economic and price effects of the ongoing Russia-Ukraine conflict.
“On the domestic front, the risks for higher inflation than currently projected relate to possible annual adjustments of administered prices not included in the forecast; short-term,” he said. Enditem