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The Bank of Botswana has raised its Monetary Policy Rate (MoPR) by 160 basis points, from 1.9% to 3.5%, as part of what it describes as a “recalibration” to strengthen policy transmission and preserve the country’s foreign exchange reserves.
This is the first rate change in over a year, with the bank having maintained the MoPR at 1.9% since August 2024.
Headline inflation averaged 2.1% in the third quarter of 2025, below the central bank’s objective range of 3–6%, but rose sharply to 3.7% in September due to higher domestic fuel prices. Inflation is forecast to average 2.7% in 2025 and rise to 5.9% in 2026, with risks tilted to the upside because of potential increases in utility tariffs and global commodity prices.
The central bank’s Monetary Policy Committee (MPC) announced the decision after its meeting on October 30, noting that commercial banks have been instructed not to increase their prime lending rates (PLRs) in response.
In August, BoB governor Cornelius Dekop cautioned against commercial banks' decision to continue increasing prime lending rates, despite an accommodative monetary policy stance might force the Bank of Botswana to invoke regulatory overreach.
It seems like Dekop and the MPC have delivered on the caution.
“This policy decision is intended to reinforce policy transmission, particularly in relation to monetary operations tools and distribution of market liquidity,” the Bank said, adding that it also complements the July 2025 adjustment of exchange rate parameters, which aimed to safeguard foreign exchange reserves.
The central bank has recently implemented targeted liquidity support measures, including longer-term repo operations and a pause in PLR increases, to ease tight market liquidity conditions. According to the MPC, these interventions have stabilised liquidity, boosted uptake of long-tenure instruments, and increased interbank foreign exchange trading activity.
Following the exchange rate adjustment in July, foreign exchange reserves stabilised at around six months of import cover, while interbank market activity rose from an average of P2.4 billion to P3 billion per month, and the Bank’s foreign exchange sales declined from P4 billion to P2.8 billion monthly.
However, the Bank cautioned that maintaining reserve stability will require stronger fiscal discipline and structural diversification, particularly amid the prolonged downturn in the diamond sector.