Commercial banks hiked prime lending rates by an average of 0.71 percentage points in just one month in May, according to data from the Bank of Botswana.
Average prime lending rates increased from 6.01% to 6.72%, a 12% increase, in that period, as banks cited a "liquidity squeeze" for increasing the rates. rates.
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| Most banks hiked their prime lending rates in May |
Last week, the Bank of Botswana governor, Cornelius Dekop, clarified that although banks increasing prime lending rates during an "accommodative monetary policy stance" might be "morally untoward", they are still in line with prevailing prudential and regulatory requirements.
"Evidently, there is a need to augment these initiatives given the persistence of the liquidity constraints and adverse outcomes such as an increase in prime lending rates by commercial banks that is misaligned with the monetary policy stance and economic fundamentals," Dekop said.
To manage the prime lending rate hikes, the bank has ruled out enforcing foreign exchange controls to force banks to repatriate their foreign currency holdings or using the MoPR to urge banks to reduce their lending rates.
The bank will instead continue to focus on dialogue with banks and monitoring the impact of current liquidity tools.