Botswana’s financial system remains resilient and continues to provide financial services without disruption, despite mounting domestic and global economic headwinds, the Financial Stability Council (FSC) said following its second meeting of the year held on November 6.
The FSC, a statutory body chaired by the Governor of the Bank of Botswana, said the country’s banking and non-bank financial institutions (NBFIs) remain “safe and sound,” supported by adequate capital buffers, healthy liquidity, and sustained profitability. The system-wide non-performing loans ratio stood at 3.2% as of June 2025, while the credit-to-GDP gap remained negative, suggesting limited risk of credit overheating.
However, the Council cautioned that macro-financial vulnerabilities continue to linger, including sluggish economic growth, uneven liquidity distribution, climate-related risks, and persistent sectoral credit concentrations, particularly towards households. The 2024/25 Household Indebtedness Survey showed a rise in debt-service-to-income ratios, especially among households reliant on unsecured borrowing, raising concerns that adverse economic conditions could amplify credit risk.
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The FSC also flagged heightened sovereign risk as fiscal pressures deepen. Weak diamond market performance, subdued growth, and limited fiscal space have eroded external buffers and tightened government finances, leading to reduced public spending. This has, in turn, squeezed banking sector liquidity, driven up funding costs, and contributed to rising lending rates. However, in its last announcement, the Monetary Policy Committee ordered banks to not hike their prime lending rates.
Globally, the Council noted that while financial conditions have modestly eased since May 2025, underlying fragilities have intensified, including high sovereign debt levels, elevated asset valuations, and deepening foreign exchange market vulnerabilities. The rapid expansion of NBFIs into traditional credit intermediation channels has also increased exposure to market and liquidity risks, underscoring the need for stronger cross-sector regulatory coordination.
Domestically, the FSC welcomed the Bank of Botswana’s recent monetary policy decisions aimed at easing liquidity pressures and stabilising the Pula exchange rate. It also highlighted ongoing reforms, including the commencement of the Banking Act, 2023, and related regulations, as key to enhancing prudential oversight, streamlining supervision, and improving crisis response mechanisms.
Additional regulatory measures, such as the Electronic Payment Services Regulations (2024), Collective Investment Undertakings Regulations (2024), and the NBFIRA Act (2023) were also cited as critical for building operational and supervisory resilience across the financial system. The Council further pointed to continued work on strengthening Botswana’s anti-money laundering and counter-terrorist financing frameworks to safeguard integrity and public confidence.
Overall, the FSC concluded that Botswana’s financial system remains robust, supported by sound risk management, strong prudential standards, and ongoing regulatory collaboration. It reaffirmed its commitment to proactive surveillance and coordinated policy responses to sustain financial stability and support the country’s broader macroeconomic and structural transformation goals.
The next FSC meeting is scheduled for May 2026.