First National Bank Botswana (FNBB) has hiked its prime lending rate by 100 basis points, from 6.01% to 7.01%.
FNBB, which raked in a profit before tax of P1 billion in its latest half-year results, joins several other commercial banks that have hiked their rates in response to the prevailing "liquidity squeeze."
In May, commercial banks hiked prime lending rates by an average of 0.71 percentage points, according to data from the Bank of Botswana.
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.